Three reasons to sell Aussie. Forecast as of 17.08.2022

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The RBA’s reliance on data is not the only reason to enter AUDUSD short trades External conditions and the state of the Chinese economy are also important. Let’s discuss the topic and make a business plan.

Weekly Australian dollar fundamental analysis

AUDUSD is falling rapidly because the Reserve Bank of Australia is not so aggressive, the recovery of the Chinese economy will be long, and the US stock indices have risen very strongly. The slowdown in the RBA’s monetary tightening and fears about the fate of the global economy allowed the Aussie’s sell-off on growth to produce profits. The short trades at the $0.7085 level were also very successful.

The minutes of the RBA’s August meeting confirmed Philip Lowe’s statement that the rate was not predetermined. The regulator seeks to slow down inflation in the direction of the target range of 2-3%, and to support the state of the economy. This is very difficult to implement, but necessary. After three monetary tightening actions of 50 bps each, the cash rate rose to 1.85%. The RBA left room for maneuver and began to rely more on data, following the example of the Fed. Although Bloomberg economists expect the rate to rise to 2.35% in September, and the futures market predicts two more actions of monetary tightening at 50 bps each before the end of 2022. In fact, the monetary tightening speed may fall.

Dynamics of the RBA rate and the main indicators of Australia

Source: Bloomberg.

The RBA monitors wage dynamics very closely. Their slower second-quarter growth of 2.6% compared to Bloomberg forecasts allows the Australian regulator to put the brakes on. At the August meeting RBA officials mentioned that more than 60% of companies expect wage increases of 3% or more. A smaller figure, which lags significantly behind inflation, lowers real incomes, consumption and GDP, could force the RBA to slow.

Not the best news came from China. Weak data on industrial production, retail sales and investment suggest that growth associated with the lifting of the blockade is fading. The unexpected PBoC rate cut even scared investors. Is the Chinese economy in trouble? If so, then wait for a new stimulus. It is unlikely that it will equal 4 trillion yuan as in 2008. At the time that sum was equivalent to $586 billion and, in relative terms, exceeded the US stimulus. According to Standard Chartered, in 2022, China’s GDP will grow not by 4.1% but by 3.3%, while economic recovery will be expensive.

Every week AUDUSD business plan

The S&P 500 rally that helps all risk assets, including the Australian dollar, could lose momentum at any time. The fall in the broad US stock index will accelerate AUDUSD sales In this regard, keep the short trades entered at the level of 0.7085 and add to them in case of a break of the support at 0.695.

EURUSD 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 considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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