The Australian dollar has rebounded from a test of major support vs the USD at 0.7000. According to economists at ING there is a couple of factors that should underpin the aussie above the 0.7100 level.

Aussie is looking at an overstretched net-short positioning

“China’s latest efforts to support the domestic economy have turned the narrative to a more supportive one for China-sensitive currencies like AUD.”

“In the commodities sector, latest developments in China are fuelling a rally in iron ore, as hopes that steel restrictions will be eased seem to be  brightening the demand outlook.”

“We think all this can help shield the aussie – which is also looking at an overstretched net-short positioning – from the blows to global risk sentiment caused by the Omicron variant spread.” 

“AUD/USD may find some good support at 0.7100.”