The Australian dollar has also suffered from the market mayhem following the Italian elections. The fear of a comeback of the European debt crisis has brought back the risk on / risk off trade. The Aussie is a “risk” currency, and when it’s “risk off”, the A$ falls.
AUD/USD is now trading just above 1.02, the lowest in 4 months, but still has some room until the really critical support line.
The deadlock in the Italian Senate could lead to new elections and derail Italy from the path of reform it was on. This is not what markets wanted to see. This also brings back the scenario of two rounds of elections in Greece, seen in May and June 2012.
The euro crashed, and the Japanese yen remembered it is a “risk off” currency after many months of declines.
The Australian dollar has its own reasons to drop: the HSBC Chinese PMI published early in the week came out weaker than expected. The Aussie has been sliding despite Chinese strength, and could accelerate its losses as softer signs emerge from the economic giant – Australia’s main trade partner.
After a few day of trading in a wide band between 1.0375 to the 1.0236 support line, we now see a decline below this line to 1.0205. The trough so far has been 1.0201.
The most important support line is 1.0150, which was the low point in the 1.0150 to 1.06 range that charaterized the Aussie’s trading since July. This line is getting closer. On the upside, 1.0236 turns into weak resistance, followed by 1.0287.
For more, see the AUDUSD forecast.Get the 5 most predictable currency pairs