Elementary Australian Greenback Forecast: Bearish
AUD/USD rose sharply final week
Plenty of various factors and markets moved within the bulls’ favor
Focus will return to rates of interest this week. Which will make life more durable for them
Searching for a technical perspective on the Australian Greenback? Try the Weekly AUD Technical Forecast.
The Australian Greenback rose to two-month highs final week, lifted by a posh cocktail of invigorating elements each international and home. Earlier than we get into the probabilities of its bullish aftertaste enduring, let’s check out them,
First after all there was the US Federal Reserve. It left rates of interest alone as anticipated, however its accompanying commentary was interpreted by markets as extra cautious on the prospect of future rises. This weakened the US Greenback fairly broadly, with its Australian cousin benefitting no less than as a lot as different main traded currencies.
Then got here Australian inflation numbers for the final quarter of the outdated yr. These have been nonetheless under goal however, by a whisker, not the extent markets had feared. Commodity markets have been enjoying ball too, with crude oil costs rising on information that Saudi Arabia was reducing provide to the US, amongst different components. Australia’s nice money cow- iron ore- additionally noticed sturdy positive aspects due to Brazilian manufacturing stoppages following a deadly mine-dam burst.
Hopes for progress, no less than, in US/China commerce talks additionally lifted the Aussie. Australia has extra pores and skin on this recreation than most third international locations due to its sturdy financial and political hyperlinks to each principal actors.
It wasn’t all excellent news for Aussie bulls though- not fairly. China’s manufacturing sector was proven to have continued the contraction which started in December, with its non-public sector sliding at its quickest tempo since 2016.
So, what of this week?
Nicely, AUD/USD is actually crusing into it with a uncommon diploma of help, regardless of these Chinese language knowledge. There’s plentiful Australian financial information on faucet however the primary occasion can be Tuesday’s financial coverage resolution from the Reserve Financial institution of Australia. No change is predicted to the document low, 1.50% Official Money Charge which has been caught since August 2016.
The obvious headwind for the foreign money is that markets now count on the OCR to move nonetheless decrease this year- a prognosis clearly expressed within the worth of rate-futures contracts. The difficulty is that the RBA insists that the subsequent transfer, be it by no means so lengthy delayed, can be an increase. Board member Ian Harper stated so once more simply final week and is cheap to imagine that Governor Philip Lowe will restate this view following the coverage name.
If he does, and futures pricing persists in its dissent, then the main focus may return to what in any occasion seems like an utter lack of near-term rate of interest help for the foreign money. Which will effectively take a few of the Aussie’s current shine off, even when solely briefly.
It’s a bearish name this week.
— Written by David Cottle, DailyFX Analysis
Follow David on Twitter@DavidCottleFX or use the Feedback part under to get in contact!