Commodity Currencies Drop

The commodity currencies such as Australia, the New Zealand and the Canadian dollars weakened against other major currencies in the Asian session on Wednesday, due to a sharp drop in commodity prices.

Crude oil prices fell to near seven-week lows as investors brace for a likely drop in demand. West Texas Intermediate Crude oil futures for September ended down $1.44 or 1.83 percent at $76.96 a barrel, the lowest settlement since June 7.

Asian stock markets traded lower, following the negative cues from Wall Street overnight, as traders remain uncertain about the outlook for the markets following recent volatility. They also remain reluctant to make significant moves ahead of the release of key U.S GDP and inflation data later in the week, which could have a significant impact on the outlook for interest rates.

Weakness in iron ore miners and energy stocks also dampened investor sentiment.

Australia's weak business activity data also led to the downturn of the currency.

In economic news, the manufacturing sector in Australia continued to contract in July, albeit at a slower rate, the latest survey from Judo Bank revealed on Wednesday with a manufacturing PMI score of 47.4. That's up from 47.2 in June, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. The report also showed that the services PMI dipped to 50.8 from 51.2 in June. The composite index fell to 50.2 from 50.7 in June.

In the Asian trading today, the Australian dollar fell to near 3-month lows of 1.6473 against the euro and 101.67 against the yen, from yesterday's closing quotes of 1.6410 and 102.99, respectively. If the aussie extends its downtrend, it is likely to find support around 1.65 against the euro and 101.00 against the yen.

Against the U.S. and the Canadian dollars, the aussie slipped to a 1-1/2-month low of 0.6583 and a 4-week low of 0.9084 from Tuesday's closing quotes of 0.6612 and 0.9115, respectively. The aussie may test support near 0.64 against the greenback and 0.89 against the loonie.

The NZ dollar fell to nearly a 1-year low of 1.8338 against the euro and a 1-week low of 1.1137 against the Australian dollar, from yesterday's closing quotes of 1.8228 and 1.1109, respectively. If the kiwi extends its downtrend, it is likely to find support around 1.84 against the euro and 1.12 against the aussie.

Against the U.S. dollar and the yen, the kiwi slid to near 3-month lows of 0.5914 and 91.41 from Tuesday's closing quotes of 0.5953 and 92.71, respectively. On the downside, 0.58 against the greenback and 90.00 against the yen are seen as the next support levels for the kiwi.

The Canadian dollar fell to more than a 3-month low of 1.3800 against the U.S. dollar and nearly a 3-month low of 111.91 against the yen, from yesterday's closing quotes of 1.3786 and 112.99, respectively. If the loonie extends its downtrend, it is likely to find support around 1.39 against the greenback and 110.00 against the yen.

Against the euro, the loonie edged down to 1.4970 from Tuesday's closing value of 1.4957. The next possible downside support level for the loonie is seen around the 1.51 region.

Looking ahead, PMI data from various European economies and U.K. for July are due to be released in the European session.

In the New York session, U.S. MBA mortgage approvals data, building permits for June, Goods trade balance for June, retail inventories for June, new home saes data for June, U.S. S&P PMI data for July, U.S. EIA crude oil data, Canada's new housing price index for June, manufacturing sales data for June are slated for release.

At 9:45 am ET, the Bank of Canada is set to announce its monetary policy decision. The bank is expected to cut its overnight rate by 25 bps to 4.5%.

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