The Australian dollar goes into reverse as commodity prices slide

Daniel Berehulak / Getty Images

The Australian dollar went into reverse on Friday evening, pulling back from a more than two-year high struck earlier in the session as commodity prices weakened.

Here’s the scoreboard as at 7.55am AEST.

AUD/USD 0.8054 , -0.0004 , -0.05%
AUD/JPY 87.15 , -0.18 , -0.21%
AUD/CNH 5.2361 , -0.028 , -0.53%
AUD/EUR 0.6698 , -0.0026 , -0.39%
AUD/GBP 0.6104 , -0.0028 , -0.46%
AUD/NZD 1.1091 , -0.0016 , -0.14%
AUD/CAD 0.9785 , 0.0003 , 0.03%

Having hit .8124 in Asia, fuelled by another bout of broad-based US dollar weakness that was sparked by a surge in the Chinese yuan, the AUD/USD slid in European and US trade, eventually closing the session at .8058.

The sharp reversal coincided with renewed weakness in commodity prices which fell heavily in China and London.

“Base metal prices slumped by up to 4.7% on the London Metal Exchange on Friday with nickel leading the declines. But aluminium fell just 0.5% with tin down 1%,” said Gareth Aird, senior economist at the Commonwealth Bank.

“Over the week all metals fell with lead down 5.7% and zinc down 4.9%.”

Iron ore and rebar futures in China also slumped, contributing to the Aussie’s reversal during the session. Iron ore is Australia’s largest goods export by dollar value.

AUD/USD Daily Chart

While fundamentals contributed to the Aussie’s late slide, Greg McKenna, chief market strategist at AxiTrader, says the Aussie is looking vulnerable from a technical and positioning perspective.

“The pin bar on the daily charts looks awful from a technical perspective,” he said in his morning note.

“It’s probably too early to call a top just yet given US dollar weakness, but with speculative accounts still very long there is room for a decent pullback toward 80 cents, then 0.7960, within an overall trend higher.”

With a quiet data calendar both domestically and abroad, the Aussie is likely to be influenced by movements in Chinese commodity futures and the Chinese yuan during Monday’s trading session.

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