AUD: long-term outlook

AUD: long-term outlook

2020-04-29 • Updated

Tactical rise

The Australian dollar has been doing pretty well lately. Specifically, the last 6 weeks give an almost identical picture for its performance against the USD and JPY. Observers recognize the strong behavior of Aussie mostly explaining it by the fact that the Chinese economy is already on a steady recovery path “dragging” the Australian economy out of the bottom with it. That is just a tactical picture, however. What is the strategic layout?


Strategic decline

For the last two years, the Australian dollar has been going down against the USD. In fact, is has been in decline against the US dollar since 2011, with only one big change that took place during 2016-2017. As the monthly chart shows, where the currency pair is currently is where it in 2009 before it started its ascension. In other words, at 11-year lows. On that monthly chart, the very last green candlestick represents these last weeks of rising that we have observed lately. Not very impressive on a grand scale. Or is it? Let’s dig into fundamentals to see what’s coming for the Australian dollar.



The sunny side has a few things to mention. First, due to close trade tides with China, Australia is one of the first economies that has started recovery. However, It is important to recognize the correct interpretation of this indication: the fact that the AUD is on the rise since the middle of March reflects good timing, not good recovery. Second, an extensive stimulus package is helping businesses and families to stay afloat and ignite the dormant economic mechanisms. So the RBA is doing its part to make sure things are as good as they can under these conditions. And third, Australia managed the virus pretty well. It could have been much worse for the country. Therefore, not all is lost.

The gloomy side, however, has some heavy factors to mention. First, the scale of economic contraction is going to be the biggest since the Great Depression. The GDP is expected to keep shrink until the end of this year, with a prognosis to reach the pre-virus levels only in 2022. That means the coming two years are going to be tough anyway. Second, there was certain consumer overspending in the first quarter of this year, which will lead to underspending in the second quarter dragging consumer activity even lower. Third, there is a risk of virus re-occurrence in the next year. Although that’s not something Australia-specific, the country does have this risk in front of it as well.

For the AUD, therefore, we the following layout. The labor market will hardly be in a position to approach full employment this year. Raising the interest rate is therefore ruled in the nearest future – at the very best. Therefore, the correct question for the AUD is not how high it may rise against the basket of currencies, but how stable it may be throughout this year, while Australia is still discovering the full scale of the virus damage.   


Oil: Russia-Ukraine Crisis Could Boost Oil Prices
Oil: Russia-Ukraine Crisis Could Boost Oil Prices

Crude oil futures surged on Monday due to disruptions in Russian refining capacity caused by Ukrainian drone strikes and Moscow's decision to cut output to comply with OPEC+ targets. The West Texas Intermediate (WTI) contract for May settled at $81.95 a barrel, up $1.32, while the Brent contract for May settled at $86.57 a barrel, also up $1.32. Russia instructed...

WTI and Brent React To a Key Pivot
WTI and Brent React To a Key Pivot

Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...

Latest news

USD: Powell Speaks on Cutting Interest Rates
USD: Powell Speaks on Cutting Interest Rates

Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...

WTT: Currency Pairs To Trade In April
WTT: Currency Pairs To Trade In April

Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.


A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera