After the rally, the Australian dollar is down under once again, down under 0.70 and this time it may be here to stay.
There wasn’t any news item coming from China or from Australia, but rather a gloomier mood for markets in the second round of digesting what came out of the European Central Bank.
The first reaction Mario Draghi’s move was positive: the Aussie rallied alongside other commodity currencies. If the ECB prints euros, that’s good enough to boost commodities and commodity currencies. In addition, it might help persuade the Federal Reserve to refrain from hiking – not to strengthen the USD too much.
But now, it seems that markets took another look at the reason to why Draghi did what he did: a worsening economic situation for emerging markets, namely China, Australia’s biggest client for commodities.
Chinese markets were closed today once again due to the WWII Victory celebrations. However, we did get data out of Hong Kong, which showed a deeper contraction: 44.4 points in the PMI, the lowest since April 2009. A weak figure in Hong Kong does not bode well for China nor for Australia.
AUD/USD
AUD/USD went from challenging the double top at 0.7060 all the way down to a new low at 0.6960. The bounce from there was so far quite shallow, with the pair peaking at 0.6985 so far, still below the very round number.
Things are far from being over for today: we have the all important Non-Farm Payrolls. a good number means another blow for AUD/USD on the assumption of an upcoming rate hike in the US, while a bad number implies an immediate delay and good news for the Aussie.
More: AUD/USD: Breaking Below A Steeper Descending Channel – SocGen
Here is how it looks on the AUD/USD chart.
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