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Australian Dollar's Fall Could Resume If US Numbers Hold Up

Fundamental Australian Dollar Forecast: Bearish

  • AUD/USD has settled into a broad range
  • But the backdrop still favours the greenback, and quite heavily really
  • If the US data come in as expected, or better, expect more falls for the Aussie

Find out what retail foreign exchange traders make of the Australian Dollar’s chances right now at the DailyFX Sentiment Page.

The Australian Dollar has settled into a tentative range, which has slowed the process of deepening AUD/USD weakness, previously in place since January.

Australian Dollar's Fall Could Resume If US Numbers Hold Up

You can see the range in the chart above. It’s the block in red. That now clearly cuts across the blue downtrend channel, which formerly governed proceedings and which was in itself an acceleration of 2018’s long slide from January’s highs.

The last couple of months’ trend toward broad US Dollar strength saw a little differentiation last week. The Euro and Sterling remained under fundamental pressure thanks to Brexit, increasing euroskepticism in Italian politics and softer economic data overall.

However, the Australian and New Zealand Dollars managed a little more strength, on higher commodity prices and an admittedly patchy revival in risk appetite. This strength has come despite ongoing weakness in some Australian economic indicators.

Assuredly, it is hard to see the AUD/USD downtrend as over, or anything like it. Monetary policy differentials still markedly favor the greenback. The US Federal Reserve is hotly tipped to raise interest rates yet again next month. By contrast, the Reserve Bank of Australia is expected to keep its own key Official Cash Rate on hold at the current 1.50% record low until August 2019, according to futures market pricing.

The coming week offers investors plentiful insight into US economic doings. Consumer confidence, GDP and personal spending data will all be released, as will May’s crucial employment figures.

We’ll get a lot less out of Australia, which will leave the US Dollar to drive AUD/USD. If the US numbers keep market focus on the probability of more Fed rate hikes this year, it’s likely that the greenback’s uptrend will resume against the Aussie, if only for lack of counter arguments from the latter’s home country.

Australian Dollar's Fall Could Resume If US Numbers Hold Up

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

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