The Australian dollar found some support on the back of the recovery in base metals and iron ore prices.
“We saw copper, nickel and iron ore prices rising over the past 24 hours, and that’s supportive of the Aussie dollar in this important week,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added, “While the base metal rally was positive for the Aussie it was the massive spike in iron ore – driven by a simultaneous rally in Chinese steel prices – that really improved sentiment toward the Aussie dollar over the past 24 hours.”
Iron ore for May on the Dalian exchange shot 4.86% higher yesterday.
But the rise in iron ore prices and the support for the Aussie may be tested this week as the markets eye the US Federal Reserve’s decision on interest rates.
“My sense is we’ll get a hawkish hike from the US Fed,” McKenna said.
“Remember Janet Yellen expressly said that 2017 is not 2015 or 2016. If that is the case and if US bonds continue to rise, driving the spread between them and Australian rates narrower, it is unlikely to be a good thing for the Aussie dollar,” he said.
McKenna pointed out “The fact that it (Aussie dollar) failed to push higher suggest that this run is done until we see exactly what the US Fed is going to do and what it is going to say this week.”
He also said that while the momentum to the downside (for the Aussie) has stalled a bit over the past few days, it doesn’t mean that the Aussie is out of the woods yet.
Today’s massive data dump from China which will release its latest data on retail sales, urban investment, and industrial production is very important as an update on where the Chinese economy is at right now.
“By extension, it’s important for Australia and the Aussie dollar. Not least because it will also impact the sentiment in base metals and iron ore markets which will then feedback into the Aussie dollar,” McKenna said.
The monthly NAB’s business survey is also due out today.
“This is my favourite economic indicator because it is broad in scope and gives a detailed information about the economy,” McKenna said.
Back in 2007, AxiTrader was founded on a simple idea: to be the broker we’d want to trade with. We’ve since grown to become one of Australia’s largest and leading Forex brokers. Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. You could lose substantially more than your initial investment.
This post has been seen 735 times.