AUD/USD To Fresh August Lows

Focus for the A$ remains very much skewed to the downside, as the broader USD index eyes fresh cyclical highs. AUD/USD broke down through the August 5th low of 0.6870 on Friday evening, touching a new month to date low of 0.6859. We are tracking a little higher currently, 0.6870/75.

• The technical picture remains bearish for AUD/USD, downside targets are sub 0.6800 now, with 0.6789 the 76.4% retracement of the Jul 14-Aug 11 up leg eyed.
• On the upside we need to get back above 0.7040, Aug 16 high, to ease bearish pressure, while also note the 50-day MA comes in at 0.6918.
• Cross asset signals were negative in the equity space, with offshore weakness across the board, while the VIX closed back above 20%.
• Core yields pushed higher through Friday's session, but AU-US spreads remain close to recent highs (-35/-40bps for the 2yr spread). This didn't offer much support for the currency late last week though.
• The US real yield remained close to August highs, lending support to broader USD moves.
• Commodities edged higher, but still finished last week at slightly lower levels for aggregate indices. Iron ore is down around the low $101/tonne region, with power cuts in China (the Sichuan region) a fresh headwind to the growth outlook.
• The domestic data calendar is quiet this week, with just the preliminary PMIs for August on tap tomorrow.