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. See our updated Privacy Policy here.

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
Subscribe
Please try again
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/arxYmtQeUn https://t.co/rFlQtyQS81
  • Canadian Dollar snapped a three-week losing streak after USD/CAD stalled at key technical resistance. Get your CAD weekly forecast from @MBForex here: https://t.co/BPHuKecwnz https://t.co/73OmuCKfU9
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/KzhQnGiLyt
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/cuneuJNZlH
  • Get your snapshot update of the of top level exchanges and key index performance from around the globe here: https://t.co/d8Re5anlG5 https://t.co/danCiP5vqK
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/JhYoQ7I19K
  • The Nasdaq 100 index is aiming to breach a key resistance level at 14,950 for a second time. A successful attempt may open the door to further gains, although the MACD indicator flags signs of weakness. Get your equities forecast from @margaretyjy here: https://t.co/BEYupi32qB https://t.co/PWeXE8tZVY
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/t34kotPE8R
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/lM1OIJdjhr
  • Trading Forex is not a shortcut to instant wealth, excessive leverage can magnify losses, and sentiment is a powerful indicator. Learn about these principles in depth here: https://t.co/lZFM8youtX https://t.co/6qGEVjDlN6
AUD/USD at Risk Amid Less-Dovish Fed, PBOC Normalization, Australia-China Tensions: Q3 Top Trading Opportunities

AUD/USD at Risk Amid Less-Dovish Fed, PBOC Normalization, Australia-China Tensions: Q3 Top Trading Opportunities

Daniel Dubrovsky, Strategist

AUD/USD Bearish – Q3 Top Trading Opportunity

  • Sentiment-linked Australian Dollar fell in Q2 despite rosy trader mood
  • Federal Reserve appears to be shaping up to be less dovish versus RBA
  • AUD/USD may struggle amid important spillovers from China in Q3

See the favorite trades from each DailyFX Analyst for the third quarter. Download our new 3Q top trading opportunities guide from the DailyFX Free Trading Guides!

The Australian Dollar topped against the US Dollar in the first quarter and continued its slow and steady descent in the following three months. The third quarter could look similar, with AUD/USD struggling. That is because it might be weighed down by a combination of a less-dovish Federal Reserve and ongoing developments in China that pose a risk to the currency’s trajectory.

In the US, the Fed is becoming less dovish. June’s monetary policy announcement showed a consensus for two rate hikes by the end of 2023, perhaps. This also likely implies that a tapering of its balance sheet could come sooner than anticipated. Meanwhile, the Reserve Bank of Australia reported that the cash rate may not increase until 2024 at the earliest.

As such, the yield advantage may go to the US Dollar in the long run as market sentiment momentum likely struggles to achieve the same breakneck pace set throughout most of last year. This is something that the growth-linked Australian Dollar could use to rekindle its upward momentum, and remains an upside factor for AUD/USD.

However in China, Australia’s largest trading partner, the People’s Bank of China (PBOC) has already been normalizing monetary policy to a certain extent. The central bank has been draining liquidity for most of this year via open market operations. This is as corporate bond issuance shrunk by the most since 2017 in May.

China’s government is trying to tackle exuberance in financial markets, expressing concerns over market bubbles and speculation in commodities. The nation is working to release metal reserves in an effort to tame soaring prices, such as what has been seen in copper. Meanwhile, geopolitical tensions between China and Australia are brewing.

In the aftermath of the Covid-19 breakout, Australia called for an investigation (along with other international communities) into China’s handling of the coronavirus. The latter responded by imposing tariffs on certain Australian products. China also sued Australia over anti-dumping measures at the World Trade Organization towards the end of June.

A combination of a less-dovish Fed, the PBOC’s normalization and deteriorating Sino-Australian tensions risks boding ill for the Aussie Dollar during the third quarter. Due to close trading relationships, economic developments in China often produce a knock-on impact for Australia. Given the sentiment-linked nature of the Aussie Dollar, this does not seem to bode well.

On the chart below, a custom majors-based Australian Dollar index can be seen aiming lower with the CSI 300 and copper prices. The index averages AUD against USD, EUR, GBP and JPY. Moreover, the momentum between the 3 data series that was seen after March 2020 has been noticeably slowing. More of the same could be ahead.

See the favorite trades from each DailyFX Analyst for the third quarter. Download our new 3Q top trading opportunities guide from the DailyFX Free Trading Guides!

Majors-Based AUD Index Versus CSI 300 and Copper Futures – Daily Chart

top trade

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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

DISCLOSURES