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AUDUSD 2-Hour Chart

Fundamental Australian Dollar Forecast: Neutral

  • The Australian Dollar[1] has bounced from its recent lows but faces significant headwinds
  • Australia’s links to China put the currency very close to the coronavirus story
  • Still, the market will probably make space to watch local jobs data

The Australian Dollar is like all other major traded assets in thrall to the ups and downs of the coronavirus story. It’s likely to remain so in the week ahead, although there are a couple of important domestic data points which will also offer the prospect of major market moves of their own.

The currency perked up in the past week when investors thought the infection rate might be slowing[2], only to struggle when reports showed cases surging in China’s Hubei province thanks to new diagnosis methods[3]. There are signs however that Australian markets have a degree of underlying resilience[4] and that even this serious contagion has not yet quite erased the optimism with which growth-correlated currencies like the Aussie[5] started the year.

AUD/USD[6] has managed a clear bounce from its recent lows even though sentiment clearly remains fragile.

Moreover, worries about Chinese demand have already hit commodity prices, and with Australia as a major supplier, the Australian Dollar faces clear headwinds, exacerbated by expectations that domestic interest rates will head further down yet from their current record lows.

Can Full-Time Job Creation Bounce Back?

The markets might get a big clue about that on Thursday when official Australian employment data for January are due. December saw a major rise in the headline job creation of nearly 30,000[7]. That was well ahead of expectations. However, impressive though they were, those gains were confined entirely

Read more from our friends at Daily FX

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