News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bullish
GBP/USD
Bearish
USD/JPY
Bearish
More View more
Real Time News
  • $Gold - right back down to the deeper support zone 1859-1873 Will bulls come in to hold support for the higher-low? https://t.co/k4ndphNSf9 https://t.co/BBSwxrkKXi
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Silver: -0.09% Gold: -0.42% Oil - US Crude: -4.19% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/lwARKXb2XM
  • Hey traders! Get your Thursday Market Update from @DailyFX Chief Strategist @JohnKicklighter 👇 https://t.co/wZeeu1mF39
  • Forex Update: As of 16:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: -0.22% 🇯🇵JPY: -0.29% 🇦🇺AUD: -0.43% 🇬🇧GBP: -0.60% 🇨🇭CHF: -0.63% 🇪🇺EUR: -0.70% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/rEtMlv24JY
  • Trump says he wants a bigger aid package than Pelosi's - BBG
  • Indices Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.55% US 500: 0.53% FTSE 100: 0.40% France 40: 0.28% Wall Street: -0.00% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/6xRjE6wqok
  • Update on #Cryptocurrencies #BITCOIN +1.65% #BITCOINCASH -1.73% #ETHEREUM +1.25% #RIPPLE -0.24% #LITECOIN -0.36%
  • $Nas bounce in channel, resistance potential around prior support, 38.2 fibo ~11,358 $QQQ $Nasdaq https://t.co/nCWhlHoEiJ https://t.co/Bm8kiHv0mH
  • US Eight-Week Bills Draw 0.085% Primary Dealers Awarded: 50.6% Indirect Bidders Accepted: 45.1% Direct Bidders Accepted: 4.2% B/C Ratio: 3.45
  • Exxon Mobil plans to cut workforce by 1,900 in the U.S. $XLE
Australian Dollar Could Hold Gains Into Month-End Inflation Data

Australian Dollar Could Hold Gains Into Month-End Inflation Data

2019-10-23 01:12:00
David Cottle, Analyst
Share:

Currency Pair: Bullish Australian Dollar

Expertise: Fundamental

Average Time Frame: Two weeks

DailyFX Quarterly Forecasts for Q4 and are available here

The Australian Dollar is in some respects a very difficult currency to forecast right now, but nonetheless there is rational hope that it can hold on to its recent gains.

That difficulty lies in the currency’s clear sensitivity to both today’s major global risk drivers, neither of which seems likely to be resolved any time soon.

Australia’s links to the US-China trade story are obvious. The country exports vast amounts of raw material to the former and has firm political and military ties to the latter. What is perhaps less explicable are the Aussie’s sensitivity to Brexit headlines. That’s a fact too though. According to UBS no currency except Sterling is as in thrall to this tortured tale.

There is also a plethora of other likely impulses. Weaker commodity prices, strong local employment data and so on.

Inflation Data May Shift Market Focus, However Briefly

However, in all this it’s easy to forget the Reserve Bank of Australia’s mandate, which is to keep consumer price inflation within a 2-3% band over time, something it has failed to do since 2015. Official numbers on this are released only quarterly, with the third quarter’s release due on October 30.

If the annualized rate ticks up to 1.8%, from last quarter’s 1.6%, the market may well take some comfort that the measure is at least moving in the right direction. Doubts have been growing about how much further down Australian rates may go. The Official Cash Rate is at a 0.75% record low now.

The RBA May Not Cut Rates As Deeply

The Reserve Bank of Australia has evinced doubts about the likely effect of further rate cuts, and fretted aloud about Aussie consumers’ frightening debt levels. Futures markets have pared expectations about how far lower rates could go. An inflation uptick could see more of this, with commensurate support for AUD/USD likely if so.

Of course, the Australian Dollar will remain vulnerable to swings in world risk appetite, especially those generated by the big stories. But domestic inflation data may return focus to the Australian economy, and that could provide the already perky AUS/USD with a bit more support yet.

Australian Dollar Vs US Dollar, Daily Chart

However, its important to be aware that the Australian Dollar remains well with an entrenched downtrend from 2018, close to eleven-year lows and, for the moment, below its last significant high.

Once the effects of any inflation uptick fade, the currency will return quite quickly to its usual risk sensitivity. Gains may be best seen as better opportunities to go short unless sustained, significant progress towards that downtrend line come with them.

Join a free Q&A Webinar and have your trading questions answered

Find out how AUD is viewed by the trading community in real time at the DailyFX Sentiment Page

Strategy not working? Here’s the number one mistake traders make

Just getting started? Check out the DailyFX Beginners’ Guide.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES