AUD fell to its lowest level in more than a decade on Monday, reflecting growing concerns about the damage the new coronavirus will wreak on China’s economy and its appetite for Australian exports.
About one-third of Australian exports go to China, with AUD trading high. This has helped make it one of the worst performing currencies this year. At the end of 2019, an Australian dollar could buy just over $ 0.70.
AUD embodies investor concerns about China’s likely slowdown, said Shane Oliver, chief economist at AMP Capital. “It makes sense because Australia is the most developed country most exposed to China through the potential impact on natural resources, tourism and education,” he said.
Natural resource markets have also been sold in anticipation of declining Chinese purchases. Iron ore and copper prices have hit, and oil has been falling for five straight weeks. China is the largest importer of oil in the world.
Before the virus became an international problem, Australia was already busy addressing the challenges of the home – the aftermath of the devastating series of summer fires. The torrential rain over the weekend extinguished many of the fires.
Markets are on standby and the main engine is the virus. The torment for AUD comes mainly from there, and for the moment Short positions seem safer and more attractive, despite the extremely strong support it currently holds (0.675 – 0.667 USD). We all know that when it comes to news, technical analysis must take a back seat.
The AUD / USD would target the 0.6430 and 0.6160 areas if the current Accumulation Area breaks (0.675 – 0.667 USD).
If the Accumulation Zone lasts, head to our post from last week here.