Free Trial

EURAUD: Downside Extends, Terms of Trade Could Provide Next Leg for AUD

EURAUD
  • The EUR/AUD downtrend extended this morning with another lower low printed at 1.6058 - extending the losing streak to 14 of the past 17 sessions - narrowing the gap with key support and the bear trigger at the cycle low of 1.5998.
  • We wrote yesterday that spot AUD's rally in recent weeks has been driven by aggressive short-covering - the improvement in the net position off the deep net short in mid-March has been the most acute since 2014. Now the short-covering tailwind has likely concluded and China stimulus news appears largely priced in, AUD bulls will need to pick up fresh catalysts for a push through 1.60 in EUR/AUD.
  • That said, terms of trade could play a bigger part on any next leg higher for AUD - beneficial export prices have pushed terms of trade to the best levels of the year so far - and any further progress will likely stem from iron ore prices, which followed China equities with a >15% rally in recent weeks.
166 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • The EUR/AUD downtrend extended this morning with another lower low printed at 1.6058 - extending the losing streak to 14 of the past 17 sessions - narrowing the gap with key support and the bear trigger at the cycle low of 1.5998.
  • We wrote yesterday that spot AUD's rally in recent weeks has been driven by aggressive short-covering - the improvement in the net position off the deep net short in mid-March has been the most acute since 2014. Now the short-covering tailwind has likely concluded and China stimulus news appears largely priced in, AUD bulls will need to pick up fresh catalysts for a push through 1.60 in EUR/AUD.
  • That said, terms of trade could play a bigger part on any next leg higher for AUD - beneficial export prices have pushed terms of trade to the best levels of the year so far - and any further progress will likely stem from iron ore prices, which followed China equities with a >15% rally in recent weeks.