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AUD/USD Exchange Rate Breaks Through 80 Cents on US Dollar Dovishness

US Dollar Exchange Rates

Confidence Figures Help AUD/USD to Hold Steady

Despite some initial weakness the Australian Dollar US Dollar (AUD/USD) exchange rate was able to climb on Monday as investors remained cautious towards USD.

At the time of writing AUD/USD is up by 0.2%, holding its head above the 80 cent barrier after rallying from a brief slide.

Caution Continues to Hamper the US Dollar (USD)

The US Dollar remained on the back foot at the start of this week’s session as it experiences a modest sell off as US lawmakers failed to prevent a US government shutdown last week.

While observers expecting the shutdown to be resolved by Tuesday it has exemplified the more broad based weakness in the US Dollar as USD investors appear increasingly sensitive to downside risks to the currency.

The dollar index –which measures USD against a basket of other major currencies- has fallen every week in 2018 so far, extending the 9% fall seen in the index in 2017.

With short positioning against the US Dollar also rising to its highest levels on record, it appears that markets remain convinced that the currency has further to fall yet.

Australian Dollar (AUD) Lifted by Uptick in Iron Ore

At the same time the Australian Dollar has started this week a little strong thanks to a recent recovery in iron ore prices.

Spot prices for high grade 62% iron ore fines closed at $76.75 a tonne last week as a 2.5% jump on Friday added to the 0.5% rally on Thursday.

The jump was largely driven by rising Chinese steel prices as production curbs over the winter prompt the market to tighten.

While prices still fell 1.7% for the week overall, the bounce in the tail end of the week led to speculation that that this could be the start of a prolonged rally.

AUD/USD Forecast: US Homes Sales to Slide?

Looking ahead the AUD/USD exchange rate may continue to climb in the second half of this week’s session with the release of the latest US housing data.

Economists forecast that both existing and new US home sales will have tumbled last month, after surging in November.

Meanwhile the Australian Dollar may find itself a little directionless this week due to a lull in domestic data, with movement in the currency instead likely to be driven by commodity prices and any further weakness in the US Dollar.