All of the commodity-linked currencies were down hard on Wednesday. The Australian Dollar was down the most because of its strong link to China. Downside momentum is building in this market which could trigger a test of the last main bottom at .8904. Ultimately, this market seems destined to test a major 50% price level at .8644.
Weakness in global equity markets is helping to put pressure on the Euro and the commodity-linked currencies. Risk sentiment seems to have shifted overnight with investors becoming more risk averse. Profit-taking and position squaring ahead of the start of the U.S. earnings season appears to be the catalyst behind this morning’s early weakness.
The U.S. Dollar hit a six-week low against the Euro driven by greater demand for risky assets and a hawkish comment from the Reserve Bank of Australia. A mid-morning report showing that the U.S. Services Sector slowed last month also contributed to the Euro’s rally on the prospects of a weaker outlook for the U.S. economy.
The drop in demand for risky assets pressured the commodity-linked New Zealand, Australian and Canadian Dollars on Monday. The AUD USD chart suggests that downside momentum is building which should drive this market through the most recent bottom at .8067. The main trend turned down in the NZD USD late last week and continued lower on Monday.
