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AUD/USD forecast for19.05.2020

May 19, 2020

May 19, 2020

Aussie is going to be the winnerDmitri Demidenko

AUD/USD could break through the two-month highs

After it became clear that China would be the first to win the struggle with the coronavirus, the Australian dollar has become my favorite. The idea to buy the Aussie seemed strange amid the first recession in Australia since the 1990s, the AUD/USD drop to the lowest low since 2002, and the QE launched by the RBA. However, as early as in [late March][1], I saw that, if the global recession had resulted from the pandemic, one should bet on the currencies of the countries that should be the first to manage the pandemic. My basic strategy has been buying the AUD from the zone of $0.59-$0.62 with the targets at [$0.675 and $0.69][2], it perfectly worked out due to the excellent [LiteForex trading conditions. ][3]

The [AUD/USD][4] has been up by 19% from the March lows, and the Australian dollar is now seen as an example to follow by the currencies of the countries hit by COVID-19. Due to China and the growth in commodity prices, Australia’s GDP could recover quicker than the U.S. and euro-area GDPs, which is an important reason to buy the Aussie versus the greenback and the euro. Remember, Jerome Powell says that the US economy will hardly recover until 2021; the ECB says the euro-area GDP will reach the pre-crisis levels only in 2022. Against such a background, it is natural that the speculators, who used to be bearish on the Australian dollar, are now exiting shorts.

AUD speculative positions

![LiteForex: AUD/USD forecast for19.05.2020][5]

Source: Bloomberg.

Canberra has done a lot to help Australia’s economy recover. The $AU130-billion fiscal stimulus, taking into account the GDP pace, looks one of the most aggressive among the G10 countries. Besides, the RBA, unlike the Fed, didn’t have to boost the balance sheet. Following the Bank of Japan, Australia’s central bank adopted the yield curve control policy, setting the target for the yield on __ 3-year Australia government bonds at 0.25%, which has proven its effectiveness. The volume of bond purchases is contracting, the market has stabilized, and they may not need to expand the monetary stimulus.

Dynamics of Australia’s bond yields and QE volumes

![LiteForex: AUD/USD forecast for19.05.2020][6]

Source: Bloomberg

Yes, bears could point to the drop in Australia’s employment by 594,300 in April and the RBA gloomy forecasts that suggest the GDP be down by 10% in the first quarter and by 6% in the entire year 2020, however, all countries are suffering from a downturn now. I would be surprised if any country reported positive statistics.

However, not everything is that bright. China supports the [AUD/USD][4] rally, but it can also send the Aussie it down. A typical example is the suspension of the Australian pork imports and the start of an anti- dumping barley import audit by China, which could increase import tariffs to 80%, as China’s retaliation to Australia for its support of the USA in the investigation of the laboratory origins of COVID-19. This idea hasn’t been further developed, so, I expect and improvement in the China-Australia trade relations. Unless there is a new round of trade wars, we can continue to buy the [AUD/USD][4] with the targets at [0.675 and 0.69.][2]

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Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of AUDUSD in real time mode

![Aussie is going to be the winner][9]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational 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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  1. www.liteforex.com/blog/analysts-opinions/aussie-meets-qe/
  2. www.liteforex.com/blog/analysts-opinions/will-the-aussie-get-the-better-of-bears/
  3. my.liteforex.com/trading
  4. my.liteforex.com/trading/chart?symbol=AUDUSD&returnUrl=true
  5. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/aussie-dollar-cftc-19-05-20.jpg?w=30&s=0182b67f00c91bd614495907a540bb99
  6. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/rba-qe-19-05-20.jpg?w=30&s=5281d0be659ea1fe9b0f587990851161
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  9. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-audusd-19-05-20.jpg?q=75&w=1000&s=086c9a3f052c6e4ddd8ee8714102ec60