In terms of AUD strength and weakness a commodity to look at is Iron ore which is Australia's biggest export – AUD/USD is trending lower and while it's oversold in the short-term bounces looks like selling opportunities – the Outlook for Iron ore and AUD/USD below...

First, we will look at the outlook for Iron ore, and its impact on the Aussie and then give our updated outlook in terms of AUD/USD and the technical levels to watch.

Iron Ore Demand

Prices of iron ore cargoes with a 62% iron content slipped toward $108, hitting its lowest levels in three weeks amid a lack of any major policy shift from the recently concluded Third Plenum in top consumer China. The readout mapped out the long-term goals of the Communist Party but did not outline concrete policy plans to address economic challenges. Meanwhile, the People’s Bank of China unexpectedly slashed key lending rates to new lows to support a fragile economy.” (TRADING ECONOMICS)

Iron Ore Supply

On the supply side, recent data shows supply of iron ore is ample, inventories at Chinese ports moved up close to 150 million tons. In addition, Australian mines also reported strong production for the current fiscal year as weather conditions improved.

China's iron ore imports have been strong so far this year, with customs data showing arrivals of 611.18 million tons in the first six months up 35.05 million, or 6.2% from the same period in 2023.

However much of the increase has gone towards rebuilding stockpiles, with port inventories from SteelHome rising 35.1 million tons since the end of 2023 to 149.6 million in the week ending July 24. Steel mills have been taking advantage of lower iron ore prices to increase inventory levels which moved down to a seven-year low in October 2023.

Technical Analysis Iron Ore 

China Problems Ahead – the World's Biggest Commodity Consumer to Continue to Slow Up

In terms of the outlook for iron ore and other commodity prices, we need to look at the outlook for China: “China surprised markets by lowering a key short-term policy rate and its benchmark lending rates on Monday, in efforts to boost growth in the world's second-largest economy.” (REUTERS) The cuts come after China reported below-forecast second-quarter economic data last week.

The reality is China is verging on deflation and faces a prolonged property crisis, massive debt, and both weak consumer and business sentiment. "The fact that PBOC didn't wait for the Fed to cut first indicates that the government recognizes the downward pressure on China's economy." (Zhang Zhiwei at Pinpoint Asset Management.)

The downward pressure won't end soon and the rate cut shows how bad the situation is in the economy – A slowing China is bad news for commodity prices, commodity currencies, and risk sentiment. The risk that Donald Trump wins the U.S. presidential election in November and his focus on putting trade tariffs on China is weighing on sentiment toward China.

Technical Analysis 

The trend is now down and bounces are selling opportunities in our view. Key levels on both daily and weekly charts are outlined below.