Aussie’s safe haven. Forecast as of 01.03.2022

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The farther from the epicenter of hostilities in Ukraine, the better you can get a place for your money. As a result, the Australian dollar is strengthening. Let’s discuss the topic and make a business plan for AUDUSD.

Weekly Australian dollar fundamental analysis

The more RBA officers talk about patience, the less credible they sound. They are less reliable not only for the future market, which has long signaled a tightening of monetary policy in 2022, but also for economists. According to the Reuters consensus forecast, the cash rate will rise from 0.1% to 0.25% in the third quarter and up to 0.5% by the end of the year. By the end of 2023, the rate will be 1.25%. This is good news for the world AUDUSD bulls, which allowed them to work out the first of the two goals set out in the previous article.

At first glance, the successful performance of the Australian dollar against the USD looks strange. The RBA could raise borrowing costs twice in 2022, but the Fed is likely to do so six or seven times. If the bankers led by Philip Lowe are willing to endure high inflation, then Jerome Powell and his colleagues have already made this mistake and now prefer to act rather than wait. In addition, the green dollar is traditionally in high demand during the escalation of conflicts as a secure currency. It’s hard to think of a better situation for USD purchases than war.

However, the Fed’s aggressive monetary restraint factor was already priced in the Fed AUDUSD quote. Seeking safe havens from international investors can lead to surprising results. Strong demand for the Chinese yuan and Australian bonds signal that the choice is based on the territorial principle. Economists love to draw parallels. If we compare the war in Ukraine with World War II, it is clear that European countries will lose, while America, Asia and Australia may gain further benefits.

The RBA’s reluctance to admit the obvious only fuels interest in Australia. Investors understand that sooner or later, the central bank will become difficult to talk about patience and remain obligated against the background of high inflation, the lowest unemployment in the last 13 years and GDP accelerated to 3.2-3.4% in the fourth quarter, according to Bloomberg experts.

Dynamics of the RBA cash rate and inflation in Australia

Source: Bloomberg.

The AUD is strengthening not only because of expectations about the tightening of the RBA’s monetary policy, strong yuan or the desire of international investors to find alternative safe-haven assets. The bullish heat market helps buyers a lot. This fact serves as a strong argument in favor of AUDUSD purchases. Fears of disruptions in the supply of oil and other raw materials due to the war in Ukraine have raised their prices, which support all commodities.

Weekly AUDUSD business plan

Of course, the position of the Australian dollar is not shaky. Greenback will launch a new attack if Jerome Powell suggests to Congress about a possible increase in the federal currency rate by 50 bps at one of the upcoming FOMC meetings. Another reason could be a strong report on U.S. jobs. In this regard, the potential for the AUDUSD rally looks limited. I suggest selling the pair when the price bounces from resistance at level 0.735 or fails to consolidate above the level 0.7265.

AUDUSD price chart in real-time mode

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

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