CHARTING MARKETS: Major Mining Company Breaks Aussie Dollar's Mettle

--The Aussie dollar estimated to fall to targets as low as US$1.0260
--Technical resistance is US$1.0520.
--But a move below US$1.0260 would be going for parity with the U.S. dollar


NEW YORK (Dow Jones)--Commmodity-linked currencies were hit hard by sellers Tuesday after misgivings about the slowing Chinese economy were given weight by a major mining company.

By 1214 GMT, the New Zealand dollar traded at US$0.8165, while the U.S. dollar traded at C$0.9930 against the Canadian dollar, bouncing sharply off a two-week low struck in overnight trade.

But the conspicuous casualty of the selling was the Aussie dollar, which is now vulnerable to a move to support targets near US$1.0000. After all, the catalyst for the selling came from Australia.

Ian Ashby, a senior executive at BHP Billiton Ltd (BHP.AU), told a press conference in Perth that Chinese demand for iron ore was "flattening out" as the world's second-biggest economy, closely tied to the Australian economy, cooled.

That was a trigger. Investors had become increasingly concerned that Beijing's tight credit policies will result in a "hard landing" where business activity would stall. And Australia, whose iron ore, natural gas and other commodity exports depend heavily on Chinese demand, would be hardest hit by that. So the BHP news, as nuanced as it likely was, was taken as a clear sell signal for Aussie dollar holders.

The Aussie has been has been trading lower against the U.S. dollar since the end of February when it peaked at US$1.0859. The current low for the downtrend is US$1.0421, recorded on March 15. Current trading is A$1.0486.

I estimate that the Aussie will find an interim bottom at US$1.0260. Resistance is US$1.0520.

Lower trading would be going for support in the US$1.0127-US$0.9932 support band. Last Aussie trading near the parity level was Dec. 20.