AUD/USD forecast for 03.08.2020

August 3, 2020

AUD/USD forecast: Dark clouds gather over the AussieDmitri Demidenko

Fundamental Australian dollar forecast for today

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

meeting

China, having managed the pandemic, is an example of the quick economic rebound. Australia, on the contrary, has encountered the second wave of COVID-19 outbreak. It is an example of how a V-shaped GDP rebound turned into a W-shaped recovery. I do not think the situation in Australia is that dramatic. Social distancing policies in Victoria should prevent the epidemic spread. But the Aussie is likely to be pressed down.

The Australian dollar has been 25% from the lows hit in March amid several bullish factors. They were the confidence in a soon victory of the pandemic, effective management of the Australian government and the RBA, and the hopes for a quick rebound of China’s GDP. However, the benefits of the [AUD/USD][1] bulls stopped working in the second half of summer. But for the sales of the US dollar, the AUD would have been corrected down much earlier. The growth in the number of coronavirus cases, the closure of borders with Victoria, a difficult epidemiological situation in Melbourne, where about 20% of the Australian population lives, reduce the chances of the V-shaped rebound of Australia’s economy.

Dynamics of coronavirus cases and coronavirus deaths in Australia

![LiteForex: AUD/USD forecast for 03.08.2020][2]

Source: Trading Economics

There are also some doubts about the quick recovery of China’s GDP. Bloomberg’s leading indicators suggest that China’s GDP growth slowed down in July. The difference between the manufacturing and new orders sub-indexes composing the PMI is just 2.3%. It is a little lower than 2.5% in June but higher than the average value of 1.4% recorded in 2019. The difference indicates that many goods remain in warehouses. It is not yet clear how China’s economy can accelerate if the foreign demand is weak and official Beijing is not willing to expand the measures to stimulate domestic consumers.

The deterioration of foreign demand and the epidemiological situation in Australia, too quick strengthening of the Aussie, and the drop in consumer prices below zero can make the RBA abandon its wait-and-see attitude already at the August meeting.

Deflationary pressure in Australia

![LiteForex: AUD/USD forecast for 03.08.2020][3]

Source: Bloomberg

In a best-case scenario, Philip Lowe and his colleagues should express concerns about the excessive strengthening of the Australian dollar. At worst, the RBA will correct its monetary policy. Taking into account that the median forecast suggests that there will be no changes on August 4, if there are any monetary policy adjustments, the [AUD/USD][1] bulls will be set back. Capital Economics says the RBA will launch the QE targeting the long-term bonds (the central bank is currently targeting 3-year bond yields) or cut the cash rate to 0.1%. BetaShares Pty says it could happen already at the next meeting. At least, markets will receive a clear signal that the rate-cutting cycle will be continued already in November.

In case of an unpleasant surprise from the RBA, it will be relevant to enter short-term sell trades on the [AUD/USD][1] and the [AUD/JPY][4] on the breakouts of the supports at 0.7085-0.7075 and 74.95-0.75 with initially narrow targets of 80-120 pips. Later, this correction can provide a good opportunity to open long-term longs.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

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

Useful links:

I recommend trying to trade with a reliable broker [here][5]. The system allows you to trade by yourself or copy successful traders from all across the globe.
Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][6] your trading account.
Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of AUDUSD in real time mode

![AUD/USD forecast: Dark clouds gather over the Aussie][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.

Rate this article:

( {{count}} {{title}} )