In terms of the AUD, it’s been a big bull move to the upside and in terms of a potential end to the trend, the price of Australia’s two biggest exports iron ore and coal should be watched closely. In this article, we will look at 3 AUD pairs AUD/USD, AUD/JPY, and AUD/CAD.
Iron Ore A Speculative Bubble
In China on the Dalian Commodity Exchange ore is trading at 9 years high and it’s up over 98.00% from the low this year. We are up from $78.00 a tonne to 155.00. in the last few days after a dip in price iron ore is powering higher but the Aussie is not following. Iron ore is a speculative bubble which will probably deflate which will weigh on the AUD.
Coal – Exports Falling As Tensions Rise With China
Another major export of Australia is of course coal and its main export market is China but China is telling buyers not to buy from China:
“Despite the swift industrial recovery from the pandemic, factories in areas in China are working only part-time, and residents in several provinces are asked to save electricity, while authorities are turning off street lights and billboards, warning of coal shortages this winter.” (Zero Hedge)
An official at the state-owned power producer China Huadian Corporation confirmed to the Financial times that local power plants that depend on Australian coal have been told to source alternative supplies. The shortage of coal is hurting Chinese industry but as one official noted “Politics come first,” the official told FT, adding that the company doesn’t see China relaxing import control just because the shortages are causing disruptions.
Iron ore and coal are Australia’s two biggest exports and iron ore prices falling and coal exports being curtailed will weigh on the Aussie. The commodity complex generally has been doing well and other commodities that Australia exports are IE copper are at overbought extremes.
AUD/JPY DAILY CHART: We have come back below the 78.00 level and a break below support 77.40 which is also the 20 Day MA could see follow through selling down to major support at the 74.00 level.
AUD/USD DAILY CHART: Yesterday we saw prices bounce from the 20 day MA but we failed after moving above 0.7600 to hold the level. We think yesterdays move could be the last push up in terms of buying and if we break back below support we could see a sell off to major support at 0.7200.
AUD/CAD DAILY CHART: We have a triple top on the chart and a break of 0.9650 could see off a correction to the downside to levels of support indicated.
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