• AUD/USD slumped under 0.7200 on Monday to its lowest since late February, a drop of over 1.0% on the day.
• The pair is being weighed by concerns about widening lockdowns in China and associated sharp downside in global commodity markets.

Aussie underperformance that dragged AUD/USD under support around the key 0.7200 level and to its lowest levels since late February has continued in the run up to the start of US trade. At current levels in the 0.7160s, the pair trades with losses of sightly more than 1.0% on the day. A sharp downturn in global commodity prices, from oil to copper and precious metals, amid concerns about widening lockdowns in key Australian export market and key global commodity consumer China is weighing heavily on the Australian dollar at the start of the week.

The past two sessions have seen AUD/USD technicals take a sharp turn for the worse. The pair broke below an uptrend in play since late January at the end of last week in the 0.7400 area and has since tumbled below its important 50 and 200-Day Moving Averages near 0.7350 and 0.7300 respectively. Bears will not be eyeing a test of 2022 lows just under the 0.7000 level.

Much will depend on whether the outbreak in China, which has now spread to some districts of Beijing, continues to grow, triggering further strict lockdowns in the world’s second largest economy, on which the Australian economy is heavily dependant. If, as many analysts fear, more cities are headed for the kind of lockdown seen in Shanghai over the last few weeks, AUD/USD hitting 0.7000 is a good bet.

AUD/USD traders will also have some key US and Australian data points to keep an eye on this week. The Aussie bulls will be hoping for a spicey Q1 2022 Australian Consumer Price Inflation report to boost expectations for RBA tightening and thus reverse some of the currency’s recent weakness. But US data in the form of the first estimate of Q1 GDP growth (on Thursday) and March Core PCE inflation (on Friday) are likely to keep Fed tightening bets robust and the buck broadly supported ahead of the Fed’s policy meeting next week.