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Forecast for AUDUSD for 19 August 2020

August 19, 2020

August 19, 2020

Forecast for AUS/AUD: Aussie is tough but fairDmitri Demidenko

Fundamental oil forecast for Australian dollar for today

Australian currency’s rate is close to its fair price

Don’t cry over the spilled milk! The Australian dollar’s fast growth from March’s low levels causes trouble to the country’s export-oriented economy and prevents inflation from reaching its target value. But even if Philip Lowe prefers a lower rate level, he admits that currency interventions won’t help resolve the issue. They are efficient only when a currency’s value is far from the fundamental one, which isn’t the case now. A faster recovery of Australia’s GDP, compared with its global peers, and the commodity market’s impetuous growth let us think that the AUD is close to its fair value.

[AUD/USD][1]’s bulls were concerned about the outbreak of COVID-19 in the state of Victoria and Beijing’s discontent with Canberra’s assumptions about the lab origins of coronavirus. Much time has passed since then. China has calmed down, even if its anger sometimes rises again, like in case of the anti-dumping inquiry into Australian wine imports. As for the Australian economy, some Australian states help out by working twice as hard. The employment rate dynamics proves that very well. July’s figures increased by 114.7 thousand against a forecast of +30 thousand. What a pleasant surprise!

The GDP’s recovery will certainly be a bumpy ride, but the Reserve Bank doesn’t need to correct the monetary policy in these circumstances. The forward market doesn’t expect the cash rate to decrease while the yield curve control allows the RBA to save “ammunition”. Interestingly, the divergence in the monetary policy has pushed [AUD/NZD][2] quotes to two- year highs. Unlike Canberra, Wellington doesn’t exclude a further decrease in borrowing costs, as swaps indicate the NZ cash rate will have fallen by 40 base points by July 2021, and it is therefore more aggressive concerning QE.

 RBA and RBNZ rate outlooks

![LiteForex: Forecast for AUDUSD for 19 August 2020][3]

Source: Bloomberg.

As a result, HSBC and Credit Agricole forecast [AUD/NZD][2]’s growth to 1.13 by the end of 2020 and by July 2021, respectively; Westpac expects a level of 1.14 within a few months; Commonwealth Bank of Australia recommends opening long positions with  a target of 1.19.

[AUD/USD][1]’s rally is about the USD’s weakness too. The latter is being sold marketwide.  Investors believe the US economy will feel badly amidst COVID-19 and the impasse in the political talks. It will force the Fed to continue softening the monetary policy. The greenback has lost preference it got during the US-China trade war. Even if the war resumes, the US dollar will hardly grow stronger. In such circumstances, there’s a higher risk that central banks diversify their gold/forex reserves in favour of other G10 currencies.

I think, the uptrends in [AUD/USD][1] and [AUD/NZD][2] will continue. Breakouts of resistance levels at 0.7285 and 1.1015 will allow bulls to build up old longs or open new long positions. At the same time, the previous [targets][4] haven’t been cancelled yet.

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Price chart of AUDUSD in real time mode

![Forecast for AUS/AUD: Aussie is tough but fair][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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  1. my.liteforex.com/trading/chart?symbol=AUDUSD&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=AUDNZD&returnUrl=true
  3. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/cahs-rate-19-08-20.jpg?w=30&s=e777c4a3639994d7ee33337c98c052f0
  4. www.liteforex.com/blog/analysts-opinions/forecast-for-ausaud-aussie-holds-its-tongue/
  5. my.liteforex.com/?category=analysts-opinions&slug=forecast-for-ausaud-aussie-is-tough-but-fair&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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  7. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-audusd-19-08-20.jpg?q=75&w=1000&s=edc7f6be25aef85bb9dfbb3aabb53caa