AUD/USD forecast for 06.07.2020

July 6, 2020

The Reserve Bank of Australia bluffs and scares the AUDDmitri Demidenko

Australian dollar forecast for today

Open the AUD/USD positions according to the outcomes of the RBA

meeting

It is difficult to predict the currency trend if it depends on a non- economic unpredictable factor. This results in controversial forecasts. That was with the pound amid Brexit talks in 2018-2019. That is now with the Australian dollar, which is very responsive to the global economic growth that depends on the COVID-19 situation. According to Morgan Stanley, The AUD/USD will be up to 0.73 at the end of 2020. JP Morgan and Rabobank, on the contrary, see the Aussie down to the lowest levels since the 1960s.

The AUD bulls bet on a faster GDP recovery in Australia than in other advanced economies. The AUD/USD positive outlook results from the increased risk appetite, rally of copper and iron ore, key components of Australian exports, and a quick rebound of China’s economy. The Aussie took advantage of the strong reading of China’s services PMI in June, and the [AUD/USD][1] surged to the top of figure 69. Looking at the AUD rally up from the lows hit in March, speculators have changed the AUD market sentiment.

Dynamics of Australian dollar speculative positions

![LiteForex: AUD/USD forecast for 06.07.2020][2]

Source: Bloomberg

The AUD bears, on the contrary, believe that the global economic recovery will take a long time, and the risks of the second coronavirus wave and the escalation of the US-China trade war are high. 41% of Bloomberg respondents expect Australia’s GDP to face a U-shaped recovery, 34% vote for a W-shaped recovery. Australia is to close the Victoria-New South Wales border in response to the COVID-19 outbreak. Besides, Beijing isn’t fully meeting its obligations under the phase-one trade deal signed in January. In the January-May period, China purchased only $5.4 billion of $33 billion of the US agricultural products, $19.5 billion of $84 billion of industrial goods, and $2 billion of $25 billion of energy products. Some experts say China is unlikely to meet purchase targets for the US imports in 2020.

Forecasts for the shape of the Australian GDP recovery

![LiteForex: AUD/USD forecast for 06.07.2020][3]

Source: Bloomberg

The RBA comments can put additional pressure on the Aussie. Ahead of the central bank’s meeting in July, Philip Lowe said that it’s really hard to argue that the Australian dollar is overvalued. If he repeats this phrase at the RBA meeting, the [AUD/USD][1] bears will go ahead. After all, I believe this will be a good chance to buy the AUD at lower prices. RBA resources are limited. It won’t cut the cash rate down from the current levels, and the yield control policy does not suggest the regulator should interfere with the bond market rates, it has not bought the government bonds for eight weeks.

I am positive about the AUD outlook. Australia will be able to manage the COVID-19 outbreak as quickly as China. The US-China trade war will hardly be resumed now, as Donald Trump is doing his best to avert the crash of the US stock market. Furthermore, the economic recovery will be faster in Australia and China than in other world’s leading countries. So, I suggest new [AUD/USD][1] purchases with the [target of at least 0.72][4].

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Price chart of AUDUSD in real time mode

![The Reserve Bank of Australia bluffs and scares the AUD][7]

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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