The aussie has been able to shake off bad news recently so how will it cope with more bad commodity price news
The Iron ore 62% delivered to Qingdao contract fell below $40 and to the lowest since May 2009 today on worries about Chinese demand and increased production
Chinese stockpiles have risen to the highest in around 7 months and producers such as BHP and Rio Tinto have taken a leaf out of OPEC's book in increasing supply to defend their market share
As a big resource for Australia the continued drop in prices heaps more pressure on the commodity side of the economy
AUDUSD looks only mildly concerned having fallen from around 0.7335 to a few pips under 0.7300 as I type
The 0.7387 area has become a strong resistance level for the pair and is the 38.2 fib of the May 2015 drop
AUDUSD daily chart
While the aussie has been able to shrug off bad news and a more neutral RBA, there's only so much news it can take on its shoulders before it starts to sag.
The picture in this pair is a lot like that of EURUSD where we're failing to break above the shorter term levels and still a huge distance from any meaningful longer term levels
AUDUSD weekly chart
It's a theme mirrored across many pairs that have been running a trend for the last few years, and the same rules apply on whether those trends change
It seems that China growth news is always simmering in the background and increased market nervousness comes in waves. Now that the ECB has cast their stone for the next few months and the Fed will cast theirs next week, the market will no doubt go looking for the next bone to chew on, and there's a very high chance that China will be it...again. If that's the case then there's more fun times ahead for the aussie
