Home Commodities Remaining Short on Commodity Dollars As PBOC Intervention Disappoints Markets

Remaining Short on Commodity Dollars As PBOC Intervention Disappoints Markets


Commodity dollars have been suffering from softer risk sentiment in financial markets and AUD/USD has been bearish for more than a month now since it reversed at the double top around 0.69. According to the pattern, this pair should fall to 0.63 since the neckline of the double top pattern came at 0.66, so we continue to remain short on commodity dollars and particularly the Aussie, since the bearish momentum has been quite straightforward here.

This pair faced resistance earlier today, at around 0.6420, where we decided to open a seel AUD/USD signal. Currently, the pair is trading just below the 0.6400 level after the bearish reversal at the 100 SMA (green) on the H1 chart, and is still close to its lowest point since November 2022, which it reached last Thursday. NZD/USD is also quite weak, as the USD advances higher.

One of the main reasons for the weakness in commodity dollars lately has been the situation in China, with the economy softening up further. The People’s Bank of China (PBoC) implemented a smaller rate cut, indicating limited policy support for the economy. This decision comes despite concerns about a worsening crisis in the domestic property sector. As a result, investor sentiment is being affected, leading to a weaker tone in the equity markets. This situation is negatively impacting the commodity dollars, which are considered risk-sensitive currencies. Additionally, the strength of the US Dollar (USD) is also contributing to the downward pressure on the NZD/USD and AUD/USD pairs.

The Commonwealth Bank of Australia has raised concerns about the Australian dollar’s potential for a more significant decline. They are indicating that the AUD is likely to continue underperforming throughout 2023. They have expressed the viewpoint that there is an increasing possibility that the Australian dollar could fall below $0.60 before the end of the year. For a change in this downward trend, it would likely require a substantial stimulus package from China, with a focus on infrastructure spending that heavily relies on commodities. Such a move could potentially reverse the ongoing decline of the commodity dollars.

NZD/USD Live Chart


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