Forex Flash: AUD/USD mirrors iron ore prices as of late – Westpac

FXstreet.com (Barcelona) - Watching daily iron ore prices has provided markets with some entertainment on the many days where equities and the AUDUSD have remained in very parallel ranges. Wednesday saw a startling -4.9% slide, giving up more of the extraordinary 83% surge from 5 September to 8 January.

Westpac is on the bullish side of the market in looking for iron ore to average above $160/ton in 2013. However, according to the Strategy Team at Westpac, "there is likely to be considerable further volatility in a market lacking the liquidity that speculators provide."

Friday's China GDP data will be a test for the AUDUSD after its setback from Australia's soft December jobs report. "Given Westpac is on the strong side of consensus on Chinese growth in H1, we expect the China story to lend support to AUD multi-month." the team notes. With ECB president Draghi strikingly confident on the outlook for Eurozone financial conditions, Europe is also a reduced threat to risk-sensitive AUD. "We retain a 'buy' bias on AUDUSD for the week ahead but there is obviously need for some caution in coming weeks."