The AUD/USD pair is trading around 0.6935 on Wednesday, recovering after reaching weekly lows earlier at 0.6883. Analysts at CIBC expect the pair to re-test the July lows around 0.6600-0.6700. 

Key Quotes: 

“We have previously highlighted the growing headwinds to domestic and global activity through inflation and hawkish central bank responses that have pressured the AUD to lower levels. We see scope for further underperformance ahead, underscored by the procyclical and high-beta nature of the currency. A prominent illustration of the pro-cyclical exposure of the AUD is now developing via the path of weaker commodity prices.”

“Commodities are being pressured as a result of building concerns over global growth and demand. Correlations between AUD and global commodities including copper and iron ore remain significant. The correlation between the AUD and commodity and equity indices is similarly noteworthy.”

“The balance of current risks still points to further AUD weakness. We expect a re-test of spot toward lows of around 0.6600-0.6700 will be seen before a major low is recorded.”