AUD/USD & ASX 200 Forecast:
- AUD/USD[1] is up 13% from its March 18 lows and has been a beacon of strength among risk assets
- Nevertheless, the ASX 200[2] lags its major equity market counterparts
- What does this mean for the Australian Dollar[3] and ASX 200?
Australian Dollar & ASX 200 Price Outlook: Aussie Leads Recovery but Stocks Lag
The Australian Dollar has charged higher in recent weeks as it continues to recover lost ground from the abrupt declines suffered across all risk assets in late February and much of March. Now more than 13% off its March 18 low, AUD/USD[4] has been a leader among growth-sensitive markets[5] but its equity counterpart, the ASX 200, has lagged comparable indices in other developed regions.
ASX 200 Price Chart: Index Lags International Competition
Chart created in TradingView
Evidenced in the chart below, the Australian Dollar has considerably outperformed the ASX 200 relative to one of the other leading risk assets, the S&P 500[6]. Using the US index as a benchmark, we can see not only the divergence between the two Australian assets, but also the formidable strength of the S&P 500 which has outperformed both AUD/USD and the ASX 200 since mid-March.
AUD/USD & ASX 200 Price Charts Relative to S&P 500 (January 2020 – April 2020)
Chart created in TradingView
That being said, the ASX 200 may recapture lost ground relative to the S&P 500 in the weeks ahead should risk appetite continue, but AUD/USD appears to be the more attractive trading opportunity of the two because of its recent strength and because it may benefit from dwindling safe haven demand for the US Dollar[7]. Consequently, AUD/USD may continue
