China’s Deteriorating Covid Situation Weighing On Commodities & AUD

AUDUSD trended lower overnight to a low of 0.6585, lowest since November 11, but is now slightly higher around 0.6600. It was the worst performer in the G10 except for JPY. DXY finished up 0.9% on the day supported by hawkish Fed speak driving US yields higher and the Covid situation in China.

• Technicals are still pointing to bullish conditions for the AUD and that the current pullback is corrective. Initial support is at 0.6604/6578 the November 21/11 lows but then the 50-day EMA of 0.6556 is the level to watch. On the upside initial resistance is 0.6797.
• AUDJPY traded in the 93.20 – 94.00 range yesterday and is now around 93.80. AUDNZD also was in a tight range ahead of Wednesday’s RBNZ meeting and is now at 1.082. AUD is down against both EUR and GBP around 0.6450 and 0.5587 respectively.
• Equity markets were lower overnight with both the S&P 500 and Eurostoxx down 0.4% as risk sentiment remained soft. VIX finished lower at 22.4%.
• Oil prices plummeted on news that OPEC+ would increase quotas but then bounced back as it then denied the reports. Brent is trading around $87.30/bbl, just below its Friday close. Base metals were also weaker and copper prices fell by 1.4%, driven by increasing Covid restrictions in China and some easing of supply conditions. Iron ore was also lower at around $95/tonne.
• Tonight at 1800 AEDT RBA Governor Lowe speaks on “Price Stability, the Supply Side and Prosperity”. It can be listened to at this link. There is little data tonight but there are a number of Fed speakers.