A$ Leads Commodity FX Lower

The A$ fell sharply post the Asia-close, falling to just below 0.7100, which is around where we open this morning. Cross asset signals and a broad USD rally weighed.

• The A$, along with the rest of the commodity bloc, are the worst performers in the past 24 hours within G10 FX. AUD and NOK fared the worst, down more than 1.3%, with CAD and NZD off by around 1%. Safe havens Yen and Swiss outperformed.
• The sharp dip in US equities (-2.38%), which faltered towards the close, didn’t help sentiment, while the VIX rebounded to 26%.
• Yields were higher across the board but led by the EU area. AU-US yield differentials remain around recent lows for the 2yr tenor.
• Commodities slipped. Iron ore down to the low $140/tonne region, versus recent highs of close to $146/tonne. Base metals also fell by close to 2%, while Brent crude eased back through $123/bbl. Shanghai announced it will lockdown 7 districts this weekend for mass covid testing, which likely weighed on commodity demand.
• AUD/USD is sub the 20-day EMA, which came in around 0.7150. Note also the pair found support ahead of 0.7160 in recent days, so that could act as a near term resistance point if we see a rebound. On the downside, 0.7036 is the May 25th low.