Article by ForexTime

The AUD/USD hit fresh six-month lows at 0.9051, which brings the 2014 lows at 0.8670 into view. The Unwinding of carry positions has hit the Aussie his week, reflected by AUD/JPY making two-week lows Friday. Weak commodity prices have hit the AUD and other dollar bloc currencies this week. Gold prices have extended to seven-month lows Friday while oil prices 2014 lows just above the $90 on a WTI basis.

The collapse in iron ore prices, which have made new five-year lows this week and are down 38% on the year, is particularly negative for the AUD, as the metal accounts for about a third of Australia’s terms of trade. The RBA has been arguing that the Aussie is overvalued relative to commodity prices, and are hoping that the market does the dirty work for them allowing exports to climb on the back of a weaker currency.

Gold continues to migrate lower, having fallen $20 to as low as $1,235.20 on Thursday. With the dollar index conversely probing 84.50, the highest since July 2013, this pattern seems to be trading on the global slowdown. The  FX revaluation in favor of the dollar, who’s host nation has some of the highest relative growth around its G3 peers, has been the underlying story. The FOMC may smooth the path to eventual rate hikes next week or in a month when QE ends, even as other central banks mull further QE to head off recession and deflation.

Even risk aversion from additional sanctions on Russia due to the Ukraine has been providing a transition mechanism for slower growth on the Continent, undermining the safety features of gold along with the recent ceasefire.

Oil prices have been hit by an increase in inventories, which are counter seasonal in the fall. According to the Energy Information Administration, U.S. commercial crude oil inventories declined by 1.0 million barrels from the prior week, in line with expectations.  Gasoline inventories increased by 2.4 million barrels last week, compared to expectation of a small draw. Distillate fuel inventories increased by 4.1 million barrels last week, well above the 0.5 million barrel build expected, but inventories are below the lower limit of the average range for this time of year.

The weekly chart of the AUD/USD shows accelerating negative momentum.  The weekly MACD (moving average convergence divergence) index generated a sell signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.  the RSI plunged with price action reflecting accelerating negative momentum while print a reading of 37, which is on the lower end of the neutral range.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com