Fundamental Australian Dollar[1] Forecast: Bearish
Australian Dollar Talking Points:
- AUD/USD[2] failed to make new lows despite gloomy newsflow
- Perhaps some investors think it has suffered enough
- The RBA appears not to agree however, and further falls look likely
Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page[3]
Last week’s Australian Dollar trading action was perhaps a little strange.
All of the factors that have weighed on it over the past year remained very much in place. Some of them even intensified. The huge differential in monetary policy between a still-tightening Federal Reserve and a Reserve Bank of Australia stuck in post-crisis accommodation mode was as obvious as ever. Trade-war fears appeared to intensify, stocks tanked[4] and the International Monetary Fund downgraded its global growth call[5]. That should have mattered to the growth-linked Australian Dollar’s fortunes at the best of times but, in the process, the IMF also trimmed its China forecasts. Of course, China mattes hugely to Australia’s export machine. Yet AUD/USD held reasonably firm through all of the above.
It even failed to slip much when RBA Governor Lowe said in Indonesia that he and his colleagues welcomed the current bout of US Dollar[6] strength and hoped for more ‘spillover effects from it,’ by which me must assume that he meant an even-weaker Aussie.
Still AUD/USD held up above the lows of the past two weeks.
Even so, it is hard to get overly bullish. The currency faces too many fundamental
