CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

All about the base AUDUSD

December 3, 2020 10:55 PM

In many ways this week has provided a perfect storm for the AUDUSD to mount an upside challenge.

  • Volatility has remained subdued as global equities spent the past week consolidating the strong gains of early November.
  • The U.S. dollar as measured by the DXY index finally broke below the bottom of its four-month range, trading to a 2 ½ year low.  
  • Australian Q3 GDP data printed at 3.3%, well above expectations of 2.5% growth, driven by robust consumer spending.
  • Upbeat comments from RBA Governor Lowe in a Statement to the House of Representatives including “Since we last met, the economic news has, on balance, been better than we were expecting.”
  • Australia's trade surplus rose to A$7,456mn in October, beating expectations driven by a solid rebound in the value of iron ore exports.

Which brings me neatly round to the subject of commodities. Driven by strong demand from China and after Brazilian miner Vale lowered its production forecast, iron ore prices are trading at 6-year highs, near $136. The chart below illustrates the positive correlation between the price of iron ore and the AUDUSD.

Key base metal, copper is up over 15% since the start of November, also on the back of supply shortages and strong demand. Analysts from Goldman Sachs see scope for the price of copper to rally from $7,700 towards $9,500 over the next 12 months, and highlight the upside risks. The chart below illustrates the positive correlation between the price of copper and the AUDUSD.

Technically, following the AUDUSD’s prompt recovery from month-end selling and the break above the .7414 high, the expectation is for the AUDUSD to push higher towards .7600c into yearend as part of a Wave iii to the upside.

Dips are likely to find support ahead of .7400c and again at .7360/50, with only a break/daily close below support at .7340/20 negating the positive bias.

Source Tradingview. The figures stated areas of the 4th of December 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024