Aussie: too small for bold acts. Forecast as of 22.06.2022


No matter how strong the state of the Australian economy is, and no matter how strong the RBA’s actions, the AUDUSD price depends on external factors. A deterioration in global risk appetite and falling iron ore prices are discouraging bulls. Let’s discuss the topic and make a business plan.

Monthly fundamental analysis of Australian dollar

Australia was one of the few major economies to avoid a recession in 2007-2009. In this regard, during the global GDP recovery, the AUDUSD price has almost doubled, reaching a 30-year high above 1.1. History has repeated itself since the 2020 crisis. From March 2020 to February 2021, the AUD strengthened by 45% against the USD. What once happened may never happen again. But what happened twice will happen a third time. The Aussie has a bright future. However, no one knows when the global recession, which has not yet begun, will end.

While the US is facing an economic downturn triggered by an aggressive Fed tightening, the situation in Australia is quite different. Bloomberg experts believe that the RBA will be able to avoid a recession, although they predict a slowdown in GDP growth from 2.8% to 2.5% in 2023 and from 2.5% to 2.1% in 2024. Their inflation estimates also increased. The expected cash rate at the end of 2022 is 2.45%, which is lower than market forecasts of 3.4%.

Dynamics of Australian inflation

Source: Bloomberg.

It should be noted that estimates of the growth of derivatives reached 4%, but Philip Lowe managed to lower them. The RBA chief said raising the rate to such a level would require the most aggressive monetary restriction in the modern history of the central bank. It would also give a major blow to consumer spending. Lowe thinks that will slow down the economy a lot. He also considers it unlikely that borrowing costs will rise by 75 basis points in July. Most likely, regulators will choose between 25 bps and 50 bps.

The hope that the Australian economy will avoid a recession, as well as the onset of the RBA’s aggressive monetary tightening, supports AUDUSD bulls. However, they are caught in the epicenter of a global riot that will break anyone. A deterioration in global risk appetite and falling iron ore prices, a key component of Australia’s exports, increase the risks of recovering from the AUDUSD downturn.

Sinosteel estimates that China’s steel inventories rose 316,000 tonnes in the week ending June 17 to 22.2 million tonnes, while some steel mills are halting production. China buys about 70% of the world’s iron ore, so fears of declining steel demand in the country are lowering prices.

AUDUSD dynamics and iron ore

Source: Business Economics.

Major banks and investment companies do not think the sale on the US stock market is over. According to Societe Generale, a typical recession will push the S&P 500 to 3200, while stagnation similar to the 1970s will drop the stock index to 2525.

AUDUSD business plan for a month

Thus, despite the positive internal factors, braces push AUDUSD down to 0.674 and 0.665. At these levels, the couple can reach the bottom and begin to heal. For now, focus on sales.

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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