AUD, NZD Test Depth of Support after Sharp Weekly Reversal

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SYDNEY, May 14 Reuters The Australian and New Zealand dollars were nursing steep losses for the week on Friday as failures to sustain breaks to upside risked a purge of long positions by disappointed bulls.

The Aussie fell back to 0.7722, a major comedown after breaking to a 10week high of 0.7891 at the start of the week. The weekly loss of 1.5 was also the largest since late February and risks cracking support at 0.7675, which could unleash a retreat to 0.7585.

The kiwi dollar faded to 0.7175 and away from its recent top at 0.7304. Support lies around 0.711520 and a break could see a retracement to 0.7000.

Both currencies have been hit by risk aversion this week as global stocks slid and a startlingly strong reading for U.S. inflation sparked speculation the Federal Reserve might have to start tapering earlier than thought.

Beijing also sounded alarms over the recent surge in iron ore prices, contributing to a sharp pullback in the commodity on Thursday after weeks of hefty gains.

The ore is Australias biggest export earner bringing in around A150 billion 116 billion a year.

A slowdown in Chinese credit growth also suggests that investment spending, and by extension Chinese demand for commodities, will begin to slow later this year or early next year, noted Joseph Capurso, head of international economics at CBA.

Nevertheless, we still see upside to AUD in coming months because we judge it is undervalued against its fundamentals.

The spike in U.S. inflation…

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