The Australian Dollar fell under pressure this year due to the slumping exports and the devastating wild fires in 2019. The AUD/USD slid as much as 4% this year, trading at 0,6740 on Jan. 28, which was a three-month low.
The negative macroeconomic factors will probably have a lasting effect on the local economy while an outbreak of a new virus in China will hurt Australian trade. The country is heavily dependent on Chinese imports, particularly on coal, metals and liquid natural gas. Consumption reduction in China, along with forced production suspension in some provinces and restriction in transportation, could have a severe negative impact on the Australian economy. China was responsible for 32.6% of national exports in 2018/2019 financial year, up from 29.4% a year before, according to the data released by the Department of Foreign Affairs and Trade of Australia.
The afflicted economy has steered the Reserve bank of Australia (RBA) to maintain its loose monetary policy. Risks of further deterioration of economic performance could prompt the monetary policymaker to lower its cash rate in the coming months. The oldest banking institution in Australia, the WestPac Banking Corporation, suggests the rate cut is likely to be announced by RBA this April. "We believe that the current positive signals around the labour market will prove to be unsustainable and we continue to expect that the unemployment rate will drift higher through 2020, reaching 5.5% by mid-year", Westpac's Chief Economist Bill Evans explains in a Weekly economic report. "We also expect that the data associated with the core issues highlighted by the Board - wages growth; inflation; consumer spending - will signal that further monetary stimulus will eventually be required," he added.
The next RBA meeting on Feb. 4, however, could end with a continuous dovish monetary policy statement, aimed to further easing of the Aussie. The current EBA cash rate is at 0.75% and was lowered three times last year from 1.5%. The Reserve Bank may turn to quantitative easing by buying government bonds only if it runs out of levers to boost the economy and will lower the official interest rate to 0.25%, the governor of RBA, Philip Lowe, said last November.
The AUD/USD could slide further to 2019 lows of 0.6670, if we take RBA's dovish statement into consideration. The scenario could come into effect if AUD/USD will manage to consolidate under the strong support level of 0.6750. The alternative technical scenario suggests possible correction to 0.6800-0.6850 that, however, may not reverse the long-lasting downward trend for the Australian Dollar.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Indiscriminate reliance on illustrative or informational materials may lead to losses.
© 2000-2021. All rights reserved.
This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at firstname.lastname@example.org.