AUD / USD falls below 0.7550 again, but remains consistent as key commodities extend rally

• AUD / USD has pulled back from previous highs above 0.7550 but despite risk aversion, it is still trading flat on the day.
• The Aussie has been supported by a surge in iron ore prices to record highs in China during the Asia session.

The AUD/USD it has retreated below 0.7550 in recent trading, but is still close to Asian session highs above 0.7570. Currently, the pair is trading flat against the USD on the day at 0.7530, and the dollar has gained some ground since the European session began amid a broad deterioration in risk appetite amid concerns over the lack of of progress in the Brexit negotiations and the US fiscal stimulus

Increase in Australia’s key export prices

The AUD has been supported by a surge in commodity prices in recent days and Friday was no different. In particular, a lot of attention has been paid to the rebound in iron ore prices in recent days. Keep in mind that iron ore is one of Australia’s key exports, grossing nearly AU $ 50 billion a year, with much of it being sent to fuel construction in China.

Iron ore futures on China’s Dalian Commodity Exchange rose nearly 10% during Friday’s Asia session, surpassing CNY 1,000 per tonne for the first time in history. According to market commentators, what is driving the move is a combination of 1) Seasonal demand (mills typically stock up on raw materials before the Chinese New Year and New Year, said Cai Yongzheng, chief futures analyst at Nanjing Iron and Steel Co. Ltd. 2) supply disruptions (Vale, the world’s second-largest iron ore producer, recently halted its production guidance for 2020 and lowered its guidance for next year) and 3) potential supply disruptions short-term caused by storms hitting Western Australia.

Problems with Australian vaccines?

The AUD has largely ignored negative news from Australia regarding a vaccine produced by Australian company CSL and the University of Queensland; The duo’s vaccine route had to be abandoned after trial participants tested false positive for HIV. While the positive results were false, meaning the trial participants’ health was not put at risk, the Australian government has turned to alternative vaccine supplies, announcing a deal with Novavax and increasing its existing order for AstraZeneca.

AUD / USD targets long-term routine towards 0.8000 and above

During the next month of the year, if the dollar continues to decline and commodity prices continue to rise amid a strong Chinese economy, the AUD could pull back to the next key resistance area that is just above 0.8100 (the version of September 2017 and highs of January 2018). On the downside, 0.7400 should offer strong support (December 2018 and August 2020 highs).

Weekly chart