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Australian Dollar: Set to Suffer if 'Risk-Off' Theme Returns

Australian Dollar: Set to Suffer if 'Risk-Off' Theme Returns

Martin Essex, MSTA, Analyst
Australian Dollar: Set to Suffer if 'Risk-Off' Theme Returns

Fundamental Forecast for the Australian Dollar: Bearish

  • The Australian Dollar has benefited from strong labor-market data and a jump in imports by China.
  • However, it will suffer if and when ‘risk-off’ sentiment returns.
  • See the DailyFX Economic Calendar and see what live coverage of key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

The past few sessions have been kind to the Australian Dollar, with AUD/USD benefiting from a strong Australian employment report, news that China’s imports grew by a larger-than-expected 20.3% in March and US Dollar weakness after Donald Trump told The Wall Street Journal that the American currency “is getting too strong”.

However, the days ahead may not be so gentle. AUD/JPY rebounded Thursday, while AUD/USD surged to its highest level since April 4.

Chart: AUD/USD Daily Timeframe (Year to Date)

Australian Dollar: Set to Suffer if 'Risk-Off' Theme Returns

Chart by IG

Looking ahead, though, the Aussie is generally one of the first currencies to suffer when traders decide to limit their risks by seeking havens such as the Japanese Yen and gold. And it would be unwise at the moment to rule out a rise in risk-off sentiment given the ongoing turmoil in Syria, the approach of the French elections and – particularly – the belligerence of North Korea.

Moreover, the Australian jobs market is likely to cool in the months ahead, IG client sentiment data are currently sending out a bearish signal and, from a technical perspective, there’s plenty of resistance for AUD/USD around 0.76.

Chart: AUD/USD 15’ Timeframe (April 12 – 13)

Australian Dollar: Set to Suffer if 'Risk-Off' Theme Returns

Chart by IG

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

Where are currencies heading in the second quarter of 2017? See our forecasts to find out

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

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