AUD/USD Tags Fresh Multi-Week Lows

The negative tone for Chinese equities (the latest 30-day grace period for missed coupon payments of US$ debt issued by Evergrande elapses today, and there has been no sign of payment, yet), wider uptick in the USD and softer iron ore prices combined to weigh on the AUD/USD during Asia-Pac hours, leaving the rate 20 pips softer on the day into London trade, just below $0.7360, a touch off the fresh multi-week lows registered an hour or so ago. Positive local data, in the form of the monthly Westpac consumer confidence print & ABS payrolls data, did little to support the Aussie.

• Our technical analyst notes that AUD/USD is trading lower again today as the pair extends the recent bout of vulnerability. The continued short-term weakness suggests scope for a deeper pullback and has opened $0.7317, a Fibonacci retracement. Note that the recent move lower is considered corrective. The recent breach of the Oct 21 high ($0.7546) confirmed a resumption of the uptrend and has exposed the 200-DMA ($0.7550).
• Nearby FX option expiries to be aware of in the lead up to today's 10AM NY cut are as follows: $0.7340-50(A$866mln).
• The broader risk tone and U.S. CPI data will be the key drivers for the cross on Wednesday, while Thursday's Australian docket will be headlined by the latest round of monthly labour market data. Over the medium term, the seemingly aggressive market pricing re: the path for the RBA's cash rate (at least vs. the Bank's own guidance) presents some downside risk for AUD.