Australian dollar to fall below 70c

The Australian dollar is under further pressure today and the next few trading sessions are seen as critical to whether the currency can stay above the US70c mark.

There may be some reprieve at this level due to the reduced trading levels because of the Christmas and new year holidays but some say as we enter the new year, a move below 70c is a real possibility and once this support level is broken, further loses will probably follow.

 “As fears build about the strength of the Australian economy, and greater volatility in global markets leads to diminishing risk appetite, an AUD/USD exchange rate with a 6 in front of it at some point this week is becoming a stronger possibility,” said Kyle Rodda of IG Markets

The trade rift between the US and China shows no signs of a compromise at the moment which is going to play on the Aussie dollars fortunes as we enter the new year and any flare up in the negotiations between the US and Australia’s largest trading partner is going to be disastrous for the Australian dollar.

If the trade talks come to a halt, US President Donald Trump is likely to keep to his promise and introduce more tariffs against China, which will send global financial markets into a tailspin and hit emerging currencies like the Aussie dollar hard

"We expect the Aussie to continue to be mainly driven by external developments in the coming months," says lee Hardman, a currency analyst at MUFG

"The worst case outcome for the Aussie would be break down in US and China trade talks which leads to the imposition of further tariffs and exacerbates the slowdown in global growth." He added.


Analyst

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