Commodity Bear Market Extends Aussie?s Woes
Today’s Spotlight Market
The Australian Dollar remains in a rut, depressed by weak commodity prices.? Many traders have also been risk averse to begin 2016, which has not been favorable to risky, economically sensitive currencies tied to commodities.? The collapse in heavy metal and Oil prices has been especially tough on the Aussie Dollar.? The country is a major metal exporter and has a close trade relationship with China.? Australia is not a major player in the petroleum market, producing an estimated 478,000 barrels a day, which puts it in 30th place globally.? However, negative Crude Oil sentiment has weighed on the price of commodities across the board.
Fundamentals
The Australian economy was greeted with more negative economic data on Wednesday, as the country reported a A$3.5 million deficit in December. This is a 30% increase from the November deficit of A$2.7 billion and A$1.2 billion worse than the A$2.3 billion deficit that analysts had forecast.? While this was the fourth largest deficit on record, it could have been even worse had the Aussie Dollar not been so comparatively weak.? The fact that the country exports heavily is why the Reserve Bank of Australia (? RBA?) has done nothing to intervene in the currency?s collapse.? When China?s economy was booming, Australia found itself in a very enviable position due to the close partnership between the countries as supplier/consumer.? Now that things have turned sour in China?s manufacturing sector, Australian exports are decreasing due to both price and volume declines.? The RBA?s most recent policy statement indicated the bank intends to keep the interest rate at its current 2.0% level.? Friday?s retail sales data may give a bit more insight on how the Australian economy is currently tracking.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Australian Dollar contract bouncing back above the 0.6945 level.? Prices could gain a bit of momentum if they manage to close above near-term resistance at the 0.7345 mark.? On the downside, new lows could mean the Aussie may test the 0.6510 level, or possibly the 0.6275 level. The RSI indicator has gone from oversold conditions to nearing overbought territory, which may inhibit advanced in the near-term.
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