FUNDAMENTAL AUSTRALIAN DOLLAR FORECAST: BULLISH

  • The RBA is expected to hold interest rates steady at record lows this week
  • However, 1Q GDP data could well outperform the last quarter of 2017
  • And the Aussie does seem to have a little tailwind

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

The Australian Dollar market can look forward to two major domestic economic news points in the coming week.

Investors will get a look at official Gross Domestic Product data on Wednesday. This should have picked up from the fourth quarter’s 0.4% on-quarter rise, economists reckon, with those at Westpac now looking for a punchy 0.9% gain. Admittedly, the previous set of numbers shouldn’t prove too hard to beat but, if bullish forecasts are met, then the Australian Dollar can probably expect a little support, simply on the basis that its home economy is growing faster than most comparable peers.

However, investors will also hear this week from the Reserve Bank of Australia. It will set monetary policy on Tuesday and no change is expected to the all-time low official cash rate. It is all-but certain to remain at 1.50% for a new record of 20 straight months. Indeed, rate futures markets don’t fully price-in a rise of any sort until late 2019.

The problem, and it’s an old one now, is that Australian economy is not doing terribly badly, but wages and inflation remain stickily low, binding the RBA’s hands.

While this gloomy interest-rate differential backdrop is unlikely to alter in the coming week, the Australian Dollar did put in a measure of outperformance in the past month. It has risen against things like the generally beleaguered British Pound but also against the US Dollar, albeit to a modest extrent.

If the growth data exceed expectations, or even fail to disappoint, then this bullish momentum could yet be sustained.

So it’s a cautiously bullish call this week, but keep an eye on the US numbers too. Even with plentiful Australian events on the data schedule, the US Dollar is likely to drive AUD/USD in the end.

Australian Dollar Vs US Dollar, Trading Range.

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!