Australian dollar price forecast 11 March 2021

2021-03-11

Aussie is breaking free. Forecast as of 11.03.2021Dmitri Demidenko

As much as the Reserve Bank would like [AUDUSD][1] prices to be lower than now, the strength of the Australian economy, the global GDP recovery and the super-cycle in the commodity market will hinder this. Let us discuss the Forex outlook and make up a trading plan.

Weekly Australian dollar fundamental forecast

Even though the AUD price fell as much as other major world currencies amid the rapid rally of US Treasury yields, I was less doubtful about Aussie’s ability to restore the uptrend against the USD than [EURUSD][2]. When the economy and the main trading partners are strong, and the commodity market can create favorable conditions, there is no need to fear that [AUDUSD][1] bulls will not be able to bounce back. In early spring, [I recommended][3] using the unique opportunity that was created by a correction to buy the pair. The strategy starts to work out.

The US Treasury yields have risen by more than 60 bps since early 2021, but there have been countries where debt rates have risen faster. First of all, this concerns Australia and New Zealand. These two countries quickly brought their economies back to normal life due to the successful fight against the pandemic.

Sovereign bond yields growth since the beginning of 2021

Source: Reuters.

If Jerome Powell and his team are right, and the Treasury yields growth reflects investors’ faith in the US economic recovery, parallels with Australia can be drawn. Its GDP increased by 3.1% in the fourth quarter despite a trade dispute with China. The economy has gained confidence, and the RBA’s dovish stance is nothing more than an attempt to curb the Aussie price. The Governor of the RBA, Philip Lowe, does not deny this. He said that the Australian dollar is not overvalued based on commodity prices. Nevertheless, Lowe would like the national currency’s price to be lower than at present.

The Reserve Bank extended its AU$100 billion QE program, which was supposed to end in April, for another six months. The RBA officials said that the cash rate will not rise from the current level of 0.1% before 2024, and it will focus on the actual, not the projected inflation. Thus, consumer prices should be firmly consolidated in the target range of 2-3% before the RBA starts talking about a rate hike.

It is obvious that the central bank is going against the wind, and if it were not for its ultra-easy monetary policy, the [AUDUSD][1] pair would be trading above 0.8 right now. Nevertheless, Canberra is unable to resist global trends endlessly. The probability that a super-cycle has started on the commodity market is relatively high, and it is not for nothing that commodity currencies perform better on Forex than others.

Changes in exchange rates since the end of January

Source: Bloomberg.

Weekly [AUDUSD][1] trading plan

The USD is not going to give up. Boosted by Treasury yields growth and the US economy’s strength, it will get on his rivals’ nerves more than once. However, the faster the GDP of the G10 currency-issuing countries recovers, the more reason there is to buy these monetary units. What seems like an early start for [EURUSD][2] is fine for [AUDUSD][1]. If the Aussie bulls manage to consolidate the price above $ 0.7765-0.7775, the chances of the uptrend recovery will significantly increase. I recommend buying the pair.

Price chart of AUDUSD in real time mode

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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