Given that October of in 2015, the AUD/USD pair has been trading within a wide-range flat, without leaving the variety of 0.70-0.73. This behavior is extremely common for the “aussie”: the price might vary in one cost niche for several months, after which it impulsively moves to the next “level” – greater or lower. The main question now is when the AUD/USD will change the trajectory of its motion and, most notably, in which direction.
The complexity of the scenario is because of the weakness of the United States dollar. If in previous years, the pair grew, as a guideline, due to strong economic reports in Australia and/or due to the fortifying of the product market, now the growth dynamics depends on how weak the position of the US currency. The Federal Reserve is still revealing a dovish mindset, and dollar bulls are forced to reckon with this fact. Short-term support for the greenback is supplied by external basic elements (issue about Brexit, for example). However if we speak about the long-lasting potential customers of the greenback, they look rather unclear, so the AUD/USD bears must not rely on the down trend of the pair just due to the conditioning of the US dollar.
Nevertheless, this does not imply that the bearish pattern of the aussie does not have any potential customers. In my viewpoint, the AUD/USD pair has more opportunities to go into the area of 60 figures than to show the opposite dynamics. Blame China. The Australian economy is very based on the Chinese, so the slowdown in the primary macroeconomic indications of China has actually not passed without a trace for the green continent. According to the most recent data, the Australian economy decreased more than anticipated in the 3rd quarter of in 2015: GDP grew by just 0.3%, while most professionals anticipated a growth of 0.6%. On an annualized basis, the indicator increased by 2.8% versus the background of a general growth forecast of 3.3%. Relative to the fourth quarter, experts likewise do not harbor positive impressions – as a lot of them think, at the end of in 2015, the Australian economy will reveal even weaker development.
And in this context, China is “in step” with Australia: according to the agreement projection, the Chinese economy this year will show the weakest development over the past 30 (!) years – 6.3%. According to initial data, in 2015 this figure was 6.6% after rising in 2017 to 6.9%. The December PMI in the manufacturing sector of China just verifies this pattern – in the last month of last year, it crossed the “red line” in the type of the 50 mark and was at 49.4 points.
Related financial indications also show a slowdown in the Chinese economy. Thus, import and export figures revealed weak characteristics: exports sharply fell immediately by 4.4% on an annualized basis, while imports decreased right away by 7.6% in yearly terms (the greatest decrease in 2 years). Summed up the Chinese inflation. According to initial forecasts, the customer cost index in 2015 was to grow by three percent, however the genuine numbers were much lower – 2.1%. The manufacturer price index was disappointing, which in December revealed an increase of 0.8%, while experts expected a downturn to simply 1.6%.
This unfavorable trend is due to numerous elements, however the main reason is, of course, the US-China trade war. Now the celebrations are preparing a broad trade offer that will put an end to practically a year-longl dispute– however even in this case, the crucial macro signs will not recover their positions in one day. Therefore, the Australian economy this year will be quite clearly feel the echoes of “military action” on the trade front.
In addition to the Chinese factor, we ought to not forget other problems that have no less noticable influence on the dynamics of the aussie In specific, we are discussing a massive decline in the real estate market in Australia: after many years of increasing housing prices, the Australian real estate market is slowing greatly. For example, the expense of real estate in the 8 largest cities of the country fell by 2.5% in 2015– this is the first truth of price decrease because 2012. For comparison – by the end of 2017, the realty market in these cities has actually risen by 11%.
The above scenarios recommend that the Reserve Bank of Australia will definitely not hurry to tighten up monetary policy. And if earlier, traders were directed in this plan at the end of 2019, now this date has actually been relocated to 2020. Furthermore, the growing debt burden of customers might require the RBA to take a softer position in the foreseeable future, while the weakening of the national currency will just be a “present” for the central bank’s members.
Therefore, the AUD/USD pair has a latent potential of decrease – a minimum of to the bottom of the 71st figure (that is, to the average line of the Bollinger Bands indicator on the daily chart).
The material has actually been offered by InstaForex Company – www.instaforex.com