Trade idea - AUDUSD
Aussie Rally Forecast to Strengthen With Commodities Booming Link To Article
The Australian dollar is turning a corner as a global recovery from the pandemic brings a windfall for the commodities exporting nation.
On a three-week winning streak, the Aussie has climbed 3% since late-January and analysts expect another 4% upside to around 75 U.S. cents by the fourth quarter, according to a Bloomberg survey. That’s after the risk-sensitive currency fell to an 18-month low amid concern over the impact of aggressive Federal Reserve rate hikes on the global economy, the omicron outbreak and the resurgence in Russia-Ukraine tensions.
Strategists are backing a boom in commodities and expectations the Reserve Bank of Australia will lift policy rates in June to fuel an Aussie rally.
“It’s hard to find a really bad story in Australia, we’ll look back here and see these were good shopping levels,” said Patrick Bennett, head of macro strategy for Asia at Canadian Imperial Bank of Commerce in Hong Kong. And while the Aussie tends to be sold when risk-sentiment takes a hit from jitters such as omicron, “that’s all well priced now” in markets.
For technical traders, the Aussie may have formed a so-called double bottom pattern and is attempting to break out of its 2021 downtrend. It has gotten a boost by a surge in iron ore to a six-month high last week -- Australia’s largest export -- while additional policy easing in China is seen further boosting demand for the country’s raw materials.
Domestic Drivers
The Australian economy is looking up after it unexpectedly added jobs in January. Traders are now watching fourth-quarter wage growth data Wednesday for further clues on Reserve Bank of Australia policy.
RBA Governor Philip Lowe has so far kept his options open on rate hikes. He reckons it will take time for low unemployment to translate into faster pay gains, suggesting tightening is still some way off.
“If and when the RBA does eventually come to tighten, and the indications from the Reserve Bank are that later this year is possible, I think it might release the Aussie dollar for a bit of appreciation,” said Chris Siniakov, head of Australian fixed income at Franklin Templeton Investment Australia Ltd.
Buy position of AUDUSDpro with 10 units would result in up to $27,880 of Profit once the take profit of 0.7495 is reached.
