In its latest report, Goldman Sachs cites expected weakness of iron ore, Australia’s key export, to weigh on AUD/USD prices in the next 12 months.”In addition to potentially lower front-end pricing, weaker iron ore prices may weigh on AUD/USD. Despite their recent surge, our commodity strategists expect that iron prices will fall over the next 12,” said Goldman.
That said, iron ore prices are on their way north to $200 after rising over 14% during the last month. The main catalysts could be China’s faster economic recovery and jumping vaccinations in the West.
The US bank also mentioned OIS curve and comparatively strong US fundamentals to back the AUD/USD bears going forward. The report adds, “Despite generally rising commodity prices, Australia-specific factors may continue to hold back AUD/USD vs other USD crosses. Most importantly, the OIS curve substantially over-prices our expectations for policy rates, and our rates strategists now see a sufficiently compelling case to own the Aussie front end.”
Against this backdrop, AUD/USD has been trading in a choppy range between 0.7680 and 0.7820 for last three weeks and is recently picking up bids around 0.7750.