The Australian dollar fell through key technical supports on Friday, breaking 12-month lows and crashing through 0.73 US cents. The AUD tumbled lower following the collapse of the Turkish Lira that prompted a broad-based flight to safety. Turkey’s deteriorating macroeconomic position escalated into an all-out currency crisis as the embattled unit plunged as much as 24%. The contagion spread to other emerging market counterparts, hampered the Euro for fears of exposure to Turkish banks and hammered demand for risk forcing a sell off in commodity led currencies and a push for haven plays and the USD.
The break below 0.7330/0.73 is significant. After a period of consolidation, the AUD appeared well bid on moves toward 12-month lows, comfortable amid ranges between 0.7300 and 0.7480, however the latest hit to risk appetite has opened the door to another downward correction and suggest there is still legs in the USD yet. Having touched 0.7270 a break toward 0.7230 and 0.7170 is open as attentions remain squarely focused on global risk appetite and trade tensions for direction into the week ahead.