The AUDUSD exchange rate suffered a deep sell-off on Friday as markets digested a hit to the country’s export-led economy.
AUDUSD – Daily Chart
AUDUSD plunged from almost 0.64 to 0.5950 on Friday and that has taken the pair through previous support from October 2022.
The Aussie dollar dropped through the 60 cent level for the first time since the pandemic as fears grow over its export-led economy.
Markets are also expecting another “Brutal” day on Monday for Aussie stocks, according to CommSec’s Ryan Felsman. Investors are bracing for a $115 billion wipeout on the Australian share market on Monday morning.
“We are expecting to see capitulation with the ASX SPI futures pointing down by 331 points or 4.3 per cent,” Mr Felsman said.
“If that does materialise, it would be the worst day since the first of May, 2020 at the height of the pandemic”.
The Australian dollar is often seen as a more liquid proxy trade for the yuan and it hit a five-year low against the greenback after China announced additional tariffs on US goods.
“This is a bit of a more hawkish reaction that he’s (Jerome Powell) focusing on the inflationary impact of tariffs. The US economy has been dealing with higher inflation, and because the US is the one doing the tariffs and it will apply to all imports, it’s likely to have more impact on the US,” said Peter Vassallo, FX manager at BNP Paribas.
“The inflationary concerns are real, and this makes sense as we think about the fact that inflation, for five years now, has been running above target”.
The bearish mood in the Aussie economy may be a good opportunity for traders to sell rallies in the short-term until there is some negotiation with the US leadership on tariffs.
