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Australian Dollar Forecast: Key AUD/USD, AUD/NZD Levels to Watch

Australian Dollar Forecast: Key AUD/USD, AUD/NZD Levels to Watch

Justin McQueen, Strategist

Australian Dollar Analysis and Talking Points

  • AUD/USD | Pullbacks Finding Support
  • AUD/NZD | Rich Levels Relative to Spreads

A bout of risk aversion sees the Australian Dollar under pressure this morning with a larger than expected drop in retail sales adding to the soft tone for the currency. However, the retail sales data can be largely overlooked given that it is a slight normalisation from the Black Friday inspired boost in prior month. That said, the trend remains the same for the US Dollar, which is likely to continue its downtrend.

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AU DATA RECAP

Australian Retail Sales (Dec P M/M) -4.2% vs Est. -2.5%

AUD/USD | Pullbacks Finding Support

Despite the modest pullback throughout today’s session thus far as equity markets edge lower, the outlook for the currency remains positive as global monetary and fiscal stimulus will continue to underpin risk sentiment. Looking at the chart, AUD/USD continues to find a bid on dips towards the 20DMA (0.7715), which in turn keeps the recent high in focus. However, failure to hold at the 20DMA risks a move to 0.7650 for support.

AUD/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% -30% -8%
Weekly 1% -15% -3%
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AUD/USD Chart: Daily Time Frame

Source: Refinitiv

AUD/NZD | Rich Levels Relative to Spreads

A cross that is of interest is AUD/NZD which is trading at rich levels relative to spreads. Overnight, NZ CPI printed above expectations, while local banks (Westpac & Kiwibank) have recently cut back on their forecasts of the RBNZ lowering rates further. In turn, with a market that is long AUD/NZD (according to leveraged positioning) risks are for a setback below 1.0700. On the technical side, focus will be on the 5/20DMA crossover for confirmation for AUD/NZD to head lower.

NZ DATA RECAP

New Zealand CPI (Q4 Y/Y) 1.4% vs. Exp. 1.0%- (Q/Q) 0.5% vs. Est. 0.0%

AUD/NZD vs AU/NZ 10YR Spreads

Source: Refinitv

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

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