Aussie could weaken along with iron ore prices

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Tuesday, Apr 26 2016

There were no data releases from Australia today, with Aussie going slightly up. The remarkable rise of the iron ore price has helped strengthen the Australian dollar recently. This rise, fueled by Chinese demand for steel, is expected to be short-lived. This should cause the Australian dollar to weaken from where it is currently, as well as iron ore related stocks.

Due to demand being strong and prices being high, idled plants are now expected to come online which will of course mean that supply increases. We expect supply will grow to a rate that knocks the steel price back down to where it started, which of course will then take the iron ore price back down with too. There is only so long that the RBA can hold out. First quarter inflation will be released this week and a bad reading here could force the RBA to act the following week at its interest rate decision meeting.

Aussie is currently being traded around 0.7730 area. Pair is likely to find support around 0.77 handle and resistance above 0.78 level. Later today, in the US session, Durable Goods Orders and CB Consumer Confidence figures are scheduled for a release.

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