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Australian Dollar Outlook: Huge Gains Put an End to Technical Downtrend

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Just what the doctor ordered!

A 1.3 cent rally on Thursday marked the Australian dollar’s best day since early 2017. A further half-cent gained on Friday morning, prior to the day’s big event, US non-farm payrolls, took AUD/USD to a 5-week high of $0.726. Only a week ago, the struggling Aussie was quoted at a 2-½-year low of $0.702.

With September’s trade balance nearly doubling expectations, and with investors ineffably relieved by reports of Brexit progress and easing trade tensions, gains over the past 36 hours have been far reaching: among others, the Aussie has made great progress against the euro, Japanese yen, Canadian dollar, Swiss franc and, as stated, the US dollar.

For technical analysts, recent price action has been particularly significant. This year’s AUD/USD downtrend has, until this point, been demarcated by a trendline drawn across peaks on the daily price chart (seen above), and that much-referenced line has been convincingly broken. Those technically inclined will now point to targets for AUD/USD of at least $0.76—an exchange rate not seen since June.

Risks to the Australian dollar remain though. Concerning economic factors in the news this week include the housing market and the health of Australia’s top trading partner, China.

On Wednesday, it was announced that Sydney home prices are falling at an annualized rate of 7.4 percent (the fastest rate of decline in 30 years) and that might unsettle decision makers at the RBA. This week also saw the release of October’s Purchasing Managers’ Index for the Chinese manufacturing sector, which posted a 27-month low.

For foreign exchange analyst Sim Moh Siong of the Bank of Singapore, trade developments are key for the Australian dollar’s near-term trajectory. Reports that US President Donald Trump hopes to strike a trade deal with Chinese President Xi Jinping at this month’s G20 summit in Argentina are “positive for risk sentiment and supportive for high-beta currencies linked to the global growth cycle such as AUD,” Siong explains.

For 2019, the outlook for the Aussie remains optimistic, but little changed from that reported in September.

 

Further Reading

 

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Last update: 1 Oct, 2019

AUD/GBP Between a Rock and a Hard Place – USD Strength

AUD/GBP versus AUD/USD and GBP/USD

Both the Australian dollar and British pound sterling have had a hard time of late caught between the rock of the China/US trade war and the Brexit hard place.

Last update: 27 Aug, 2019

Australia Cuts Interest Rates to Record Low

RBA Australian dollar AUD currency news and forecasts

The RBA has cut Australian interest rates to a record low of 1 percent in an effort to boost inflation. The Australian dollar is slightly stronger following the widely expected decision but is expected to lose 5–7 percent of its value before year-end.

Last update: 14 Aug, 2019

  

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Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 

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