Aussie discouraged bears. Forecast as of 13.03.2024


The per capita recession of the Australian economy, falling iron ore prices and disappointing Chinese data are putting pressure on the Australian dollar. However, the AUDUSD fate is in the hands of the Fed. Let us discuss this topic and make up a trading plan.

Contents

Weekly Australian dollar fundamental forecast

Asset managers continue to repeat their mistakes. In November 2022 they added up to AUD bearish trades to the highest levels in 8 months. However, an improvement in global risk appetite, a faster opening of the Chinese economy than expected and positive Australian labor market data forced traders to set back. A year and a half later, history repeated itself, pushing AUDUSD to a two-month high.

This time, money managers added up to net shorts to a record high due to expectations of a reduction in the cash rate by the RBA following the release of weak Australian inflation data, a sluggish economic recovery in China, and a fall in iron ore prices from $140 to $100 per ton. However, all the negativity was surpassed by Jerome Powell's statement about the imminence of the first Federal funds rate cut. The US dollar collapsed against the world's major currencies, and AUDUSD bears were once again discouraged.

Dynamics of AUDUSD and asset managers' net longs

    

Source: Bloomberg.

AUD buyers mention strong PMI growth, imports and consumer prices in China from January to February and hope that iron ore will anchor near $100 per tonne. While large producers such as BHP and Rio Tinto have low costs and high margins, their smaller competitors will be forced to curtail production, which will support prices. However, major players can easily take their place, especially in conditions of weak demand from China. The country's gains could be attributed to Lunar New Year celebrations, which boosted domestic demand. From March onwards, the economy will struggle without additional stimulus.

AUDUSD bulls should not rely too much on Australia's GDP growth, which is associated with active immigration. On a per capita basis, the figure fell by 0.3% QoQ and 1% YoY in the fourth quarter. 13 cash rate hikes to a 12-year high of 4.35% contributed to this.

Dynamics of Australia's GDP and RBA rates

Source: Bloomberg.

According to the Commonwealth Bank of Australia, a further slowdown in the Australian economy will force the RBA to ease monetary policy in September. If the timing of the start of the Fed's monetary expansion shifts from June to a later period, this will contribute to the resumption of the AUDUSD downtrend.

The fate of AUDUSD depends on external, not internal factors. First of all, on the March FOMC forecasts for the Federal funds rate. In December, the Fed expected it to decline to 4.75% in 2024. If the estimated figure rises to 5%, the US dollar will rise from the ashes.

Weekly AUDUSD trading plan

AUDUSD risks consolidating in the range of 0.6565-0.6665 until March 20. On this day, the results of the Fed meeting will be known. Purchases on decline and sales on growth are relevant at the moment. After the meeting of the US regulator, it will become clear in which direction the pair will move.

Price chart of AUDUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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