AUD/USD is under downward pressure, partly due to foreign investments withdrawing from commodity-linked stocks. Gold miners have dropped nearly 10%, hitting a three-week low as traders took profits after gold reached record highs. The currency pair is trading below 0.6500, with the Australian Dollar weakening due to less demand for commodity stocks. As a major gold exporter, Australia is feeling the effects of these foreign outflows.

Gold Miners at Lowest Level

Gold miners are at their lowest point in over three weeks and are facing their largest decline since April 23. This drop follows a fall in gold prices after traders capitalized on the recent highs. On a brighter note, there is hope for a US-Australia trade agreement that might help limit the AUD’s decline. A USD 8.5 billion minerals deal was signed, securing access to Australian rare-earth resources, which counters China’s export restrictions. Concerns about a prolonged US government shutdown could impact the USD. As the fourth week of the shutdown goes on without a resolution, important economic reports, including Nonfarm Payrolls, may be delayed, increasing market uncertainty. Key factors influencing the AUD include Australia’s interest rates, iron ore prices, and the state of the Chinese economy. A positive trade balance is beneficial for the AUD, reflecting strong foreign demand for Australian exports.

Increased Pressure on the Aussie

The AUD/USD is facing renewed pressure and is now trading below the 0.6600 level. This weakness mirrors previous outflows, especially with data showing China’s Caixin Manufacturing PMI dropped to 49.5, indicating lower demand for Australian commodities. Traders might consider buying put options to protect against further declines. The Reserve Bank of Australia is maintaining its cash rate at 4.35% to combat inflation, which should support the Aussie. However, the market is focused on global risk sentiment, which remains shaky. This situation brings uncertainty, and traders might explore strategies like long straddles on AUD/USD to benefit from significant price moves in either direction ahead of major data releases. Gold continues to play a crucial role for the Australian dollar. Traders recall sharp profit-taking after record highs back in 2024. Currently, gold is stable around $2,250 an ounce, and implied volatility is high, indicating that the options market anticipates a large price swing. This environment favors traders who expect geopolitical events or inflation surprises to drive significant movement. The US dollar faces challenges reminiscent of late 2023 government shutdown fears. Looking ahead to the US debt ceiling negotiations, which must be sorted by early 2025, there is considerable political and fiscal uncertainty. This scenario could weaken the dollar, leading traders to use options to shield against sudden volatility spikes across major USD pairs. Conversely, the critical minerals agreement signed between the US and Australia in 2023 is starting to support the Aussie. Reports show that Australian exports of lithium and rare earths to the US have risen by over 15% since the agreement, creating a stable demand for the currency. This long-term factor may limit potential declines, making it riskier to hold outright short positions on the AUD. Create your live VT Markets account and start trading now.

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