Australia’s highest credit standing and robust bond yields make the Australian greenback a extremely enticing safe-haven asset. This will increase its attraction in comparison with its opponents. Let’s focus on this subject and make a buying and selling plan for the AUD/USD pair.
The article covers the next topics:
Main Takeaways
- The Australian greenback is outperforming its G10 counterparts.
- The RBA might increase charges as early as February.
- The bond market is supporting the aussie.
- Lengthy positions on the AUD/USD pair might be thought of with a goal of 0.72.
Month-to-month Basic Forecast for Australian Greenback
When the US greenback loses floor, the euro turns into robust however fragile, and the yen turns into low cost however dangerous, there isn’t any higher different than the Australian greenback. Because the starting of the 12 months, it has risen by 5% and ranks second amongst greater than three dozen of essentially the most liquid currencies on Foreign exchange, trailing solely the Brazilian actual. The aussie’s standing as a high-yield refuge and expectations that the RBA will enhance the money fee for the primary time since February 2023 have pushed AUD/USD quotes above 0.7.
Australia has the very best credit standing, and its 10-year bond yields have soared to a 26-month excessive amid optimistic macroeconomic statistics and market confidence within the RBA’s financial coverage tightening. Unemployment falling to 4.1% and employment rising to 65,200 in December, coupled with inflation accelerating to three.4% and companies costs to 4.1%, raised the possibilities of a key fee hike in February from 33% to 60%.
AUD/USD Efficiency and Australia-US 10-12 months Bond Yield Unfold
Supply: Bloomberg.
The yield unfold between Australian and US bonds has widened to a three-year excessive, resulting in capital flows from the USA to Australia and supporting a strong basis for the AUD/USD pair’s rally.
The Australian greenback is buoyed by rising commodity costs and excessive international threat urge for food. The S&P 500 index hit a document excessive for the primary time in two weeks on expectations of optimistic company earnings from tech giants. On the identical time, the shift within the US inventory market from concern to greed has boosted the AUD/USD pair. The very fact is that the aussie is delicate to the VIX index.
AUD/USD Charge and VIX Index
Supply: Bloomberg.
Certainly, such a fast rally in AUD/USD quotes wouldn’t have occurred if it weren’t for the weak spot of the US greenback. Considerations amongst buyers about coordinated foreign money intervention by Washington and Tokyo to strengthen the yen towards the buck, in addition to verbal interventions by Donald Trump, who welcomed a weaker US foreign money, despatched the USD index tumbling to a virtually four-year low.
Revenue-taking after a pointy rally forward of January’s FOMC assembly compelled AUD/USD bulls to retreat. The Australian greenback took a step again, however is able to resume its rally at any second. Aussie bulls have so many progress drivers that it’s unclear what might cease them.
Month-to-month AUDUSD Buying and selling Plan
Lengthy positions opened on the AUD/USD pair firstly of December proved to be a sound technique. The pair managed to succeed in the primary of two bullish targets of 0.695 and 0.705 and got here inside arm’s attain of the second goal in the course of the week. In opposition to this backdrop, the aussie might be bought on pullbacks with the goal of 0.72.
This forecast is predicated on the evaluation of elementary components, together with official statements from monetary establishments and regulators, varied geopolitical and financial developments, and statistical knowledge. Historic market knowledge are additionally thought of.
Value chart of AUDUSD in actual time mode
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