- AUD/USD dipped below 0.7200 on Monday to its lowest level since late February, down more than 1.0% on the day.
- The pair is weighed down by concerns over expanding lockdowns in China and the associated sharp drop in global commodity markets.
The underperformance of the Australian dollar that dragged down the AUD/USD Low support around the key 0.7200 level and to its lowest levels since late February has continued in the run up to the start of US trade. At current levels in the 0.7160, the pair is trading down over 1.0 % on day. A sharp drop in global commodity prices, from oil to copper to precious metals, amid concerns about widening lockdowns on the key Australian export market and the world’s top commodity consumer, China , is weighing heavily on the Australian dollar at the start of the week.
The last two sessions have seen the AUD/USD technicals turn sharply worse. The pair broke below a bullish trend in play from the end of January to the end of last week in the 0.7400 area and has since fallen below its important 50 and 200 day moving averages near 0.7350 and 0.7300 respectively. The bears will not be watching for a test of 2022 lows just below the 0.7000 level.
Much will depend on whether the outbreak in China, which has now spread to some districts of Beijing, continues to grow, prompting more strict lockdowns in the world’s second-largest economy, on which the Australian economy heavily depends. If, as many analysts fear, more cities head towards the type of lockdown seen in Shanghai in recent weeks, AUD/USD hitting 0.7000 is a good bet.
AUD/USD traders will also have some key US and Australian data points to watch this week. Aussie bulls expect a high Q1 2022 Australian consumer price inflation report to boost RBA tightening expectations and thus reverse some of the currency’s recent weakness. But US data in the form of the first estimate of Q1 GDP growth (on Thursday) and core PCE inflation for March (on Friday) are likely to keep tightening bets strong from the Fed and the US. Dollar is broadly supported ahead of the Fed’s monetary policy meeting next week.
Technical levels
Source: Fx Street
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