The US Dollar to Australian Dollar exchange rate continued to perform limply on Wednesday as demand for risky currencies wasn’t sturdy enough to undermine USD.
USD/AUD slipped at the beginning of this week, falling from 1.3430 to hover above the level of 1.3350.
The pair neared a weekly high of 1.3450 on Tuesday but slipped once more and still trends within this relatively narrow region.
Today’s US Dollar exchange rates are displayed below:
US Dollar (USD) Struggles to Benefit from Better US Growth Expectations
After its strong performance in recent weeks, the US Dollar has been unable to advance against a weaker ‘Aussie’ despite numerous upside factors.
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Tuesday’s American session saw the publication of the US annualised Q3 Gross Domestic Product (GDP) estimate.
According to the print, US growth was on track to score an impressive 3.2% in Q3 2016 despite election jitters. This was well up from the initial estimate of 2.9% and the new estimate of 3.0%.
US consumer confidence for November also impressed. October’s result was revised higher from 98.6 to 100.8, and November’s score eclipsed the 101.2 estimate by hitting 107.1.
Despite this and bets of a December Federal Reserve rate hike hitting 99%, the US Dollar appeared to struggle with levels of psychological resistance as it failed to record any gains.
Australian Dollar (AUD) Weakened by Commodity Jitters
The ‘Aussie’ was one of the best performing commodity-correlated currencies on Monday but has since become one of the worst.
This highly volatile movement has been due to significant shifts in commodity trade this week. Monday saw traders bullish on iron ore and oil amid forecasts that these commodities were on track to surge even higher.
However, on Tuesday bets of an OPEC oil production cap being agreed in Wednesday’s oil producer meeting turned traders off from risk. Prices of iron ore, Australia’s most lucrative commodity, also dipped from US$80 per tonne and the ‘Aussie’ plunged as a result.
Ahead of OPEC’s Wednesday meeting, Australian Dollar trade was a little sturdier.
USD/AUD Forecast: Shifts in Risk-Sentiment could Drive Exchange Rate
The US Dollar to Australian Dollar exchange rate could recover in the coming week, but this largely depends on how commodity news unfolds in the coming days.
If OPEC impresses markets with its oil output cut proposals on Wednesday, demand for risk-correlated currencies could improve and give the Australian Dollar a stronger footing to trade on.
However, if prices of iron ore continue struggling, demand for the ‘Aussie’ may be muted compared to its other commodity-correlated peers.
The US Dollar, on the other hand, still has plenty of upside supportive factors in underlying trade. This means its losses are likely to be limited, even if upside factors in AUD trade improve.
Bets of a December Fed rate hike remain extremely high and the Federal Open Market Committee meeting is now only two weeks away. As a result, the outlook for USD/AUD remains on the upside, but certain risk factors could push the pair lower until it hits key support.
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