Australia is not isolated from distant Greece and certainly not from it’s No. 1 trade partner China.
The Australian dollar opened the new trading week on lower ground, slipping to 0.7585 before staging a recovery. Will the next move see new multi-year lows?
Greece
Quick update: The Greek crisis quickly deteriorated during the weekend. Talks broke up and the Greek PM announced a referendum on the creditors’ proposal.
This was followed by the Eurogroup rejection of a short term bailout extension by Greece. Then, the ECB decide to leave the ELA limit unchanged, basically forcing capital controls in Greece.
You can see everything Greece related here.
As markets opened, we had flows into safe haven currencies, the dollar and the yen, and this hurt the Aussie.
China
The crash in Chinese stocks continued, and the Shanghai stock market is officially in a bear market. There is a chance that IPOs will be frozen. This fall followed huge rallies beforehand.
The Chinese authorities responded with both cutting the interest rates and also with a cut in the RRR. Moving on both tools is quite rare: it’s usually only one move.
As Australia still depends on China in the commodity trade, the Aussie felt this as well.
Australia dollar
AUD/USD started the week with a gap lower and fell as low as 0.7585. From there, it did begin recovering but failed to reconquer the round 0.77 level.
0.7540 remains the ultimate line of support and 0.7660 is resistance.
More: AUD and potential fiscal stimulus – Credit Suisse
