Aussie Tied to Chinese Demand in Forex Trading

Australian dollar in currency trading

The Australian dollar is retreating in currency trading on the FX market on the news that the Shanghai stock market continues to slide. Indeed, because the Aussie is tied to Chinese demand when it comes to forex trading, weakness in China is a serious problem for the down under currency. GFT’s Boris Schlossberg looks at recent Aussie performance in forex trading:

The Aussie spiked to set a fresh year high of 8479 in post news reaction but has since faded back to the lower 8400s as profit taking kicked in. The AUD/USD could still make another run at the 8500 level but at this point the pair is priced for perfection and if the Shanghai slide continues, AUD/USD& relative strength could quickly turn into relative weakness and the unit could see a sharp correction in the week ahead.

China is one of the biggest importers of Australian commodities. The demand for the resources of Australia has driven the economy for quite some time. However, if China is struggling, than demand decreases and that adds weakness to Australia’s economy — and economy that has held up remarkably well throughout the recession.