The AUD/USD is little changed on Monday morning as forex traders react to the weak US non-farm payrolls published on Friday and the surging iron ore prices. It is trading at 0.7842, which is slightly below Friday’s high of 0.7863.
Iron ore surges to record
Australia is a leading commodity exporter, especially to China. The country sells commodities worth billions of dollars every year. Iron ore, which is used to manufacture steel, is one of its most important commodities.
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Iron ore prices surged by more than 10% to a new record high as the market continued to experience high demand from China. The metal’s price surged to $226 a ton in Singapore. This is after the prices rose above $200 for the first time on record last week.
Higher iron ore prices are good for Australia and the AUD/USD because it leads to more demand for the Aussie. Further, other commodities that Australia exports like copper and coal have also continued to rise. Indeed, the closely-watched Bloomberg Commodity Index (BCOM) is hovering near its highest level on record, as investors bet on a commodity super-cycle.
The AUD/USD is also rising because of the relatively weaker US dollar. The dollar index has dopped by more than 1.2% in the past few days.
US dollar index
The losses accelerated on Friday when the United States published the relatively weak non-farm payrolls numbers. The data showed that the economy added less than 300,000 jobs while the unemployment rate surprisingly rose. Therefore, analysts believe that the Fed will continue with its dovish stance in the near term. On the other hand, the Reserve Bank of Australia (RBA) has hinted that it will soon start tapering its asset purchases.
Later this week, the AUD/USD will react to the latest Australia new home sales numbers that will come out on Tuesday. They will be followed by the Westpac consumer sentiment and building approvals set for Wednesday. The pair will also react to the latest US inflation, retail sales, and initial jobless claims numbers.
The two-hour chart shows that the AUD/USD pair broke out above the key resistance level of 0.7816 on Friday. The pair then rose to 0.7863, which was above the 25-day and 15-day exponential moving averages (EMA). The two lines of the MACD have also risen to the highest level since April 15. It also seems like it is forming a bullish flag pattern. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.7900. However, a drop below 0.7816 will invalidate this trend.