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Australian Dollar Backdrop Likely To Stay Constructive For a Change

Australian Dollar Backdrop Likely To Stay Constructive For a Change

David Cottle, Analyst

Fundamental Australian Dollar Forecast: Bullish

  • The Australian Dollar has risen strongly this month
  • Trade and stimulus hopes have boosted it, and other pro-cyclical assets
  • Now, like all of them, it’ll be focused on the Fed.

Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page

The Australian Dollar has enjoyed a strong run of gains in September as the global backdrop has become more friendly to such growth-sensitive assets.

A clearly better tone to US-China trade relations has paid a big part in the Aussie’s rebound, supporting the currency along with crude oil and global stock markets. The European Central Bank has also unleashed new stimulus and hope remains high that the US Federal Reserve will cut interest rates on Wednesday. Indeed, the ‘Fedwatch’ tool from the Chicago Mercantile Exchange puts the chance of a reduction at just over 90%.

Still, the Australian Dollar market may well be on hold to some extent, probably like most others, until the Fed has made its call.

It’s Not Quite All About the Fed This Week

The US central bank isn’t quite the only game in town this week, though. The domestic data schedule offers minutes from the last Reserve Bank of Australia monetary policy meeting. That saw the Official Cash Rate held at the record 1% low which has prevailed since July. Futures markets still think that another cut will be forthcoming, possibly at the end of the year, but they seem less certain that there will be any more.

Thursday will bring official Australian employment data for August. A chunky increase of 20,000 jobs is expected, with the unemployment rate expected to be steady at 5.2%. An outcome like that would show that job-creation remains a bright spot for the Australian economy and, given that the RBA is known to be watching this series especially closely, would probably support the currency.

All up the backdrop looks reasonably constructive for the Australian Dollar and, for as long as markets have faith that China and the US are committed to keep talking on trade, it’s likely to remain so. Much will depend on the Fed this week, of course, but, assuming it doesn’t disappoint, the Australian Dollar may well continue to gain.

AUDUSD Daily Price Chart

Australian Dollar 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!

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