Australian dollar price forecast 13 April 2021

2021-04-13

Aussie acts like a miner’s budgie. Forecast as of 13.04.2021Dmitri Demidenko

When the central bank adopts an unconventional monetary policy and the markets are ready to test the regulator’s strength, the entire financial world’s attention is focused on this confrontation. How will the RBA win or lose affect [AUDUSD][1]? Let us discuss the Forex outlook and make up a trading plan

Weekly Australian dollar fundamental forecast

It would seem that after the [AUDUSD][1] sale in March caused by the growth of US Treasury yields, the slow vaccination rate in Australia, and the fading of the credit impulse in China, traders have hopelessly lost interest in the Australian dollar. On the contrary, hedge funds continue to hold Aussie net longs near the highest levels since November, hoping that strong local PMI and employment statistics will help recover the AUDUSD uptrend. This is not the only reason to be optimistic about the bright future of the Australian dollar.

Dynamics of [AUDUSD][1] and Australian dollar speculative positions

Source: Bloomberg.

Nowadays, the Aussie acts not just as a bird but as a miner’s budgie. Everyone is interested in how the AUD will behave. Unlike the Fed, which turns a blind eye to the rally in Treasury yields, the RBA does not intend to abandon the idea of targeting rates on 3-year bonds. As a result, the suspense is getting more intense. Will the central bank be able to resist the market in the context of the rapid growth of the world economy? If the RBA fails, then central banks from other countries will dismiss this practice as ineffective. However, is it wise to oppose someone who has a printing press at hand? The Fed and the ECB experience shows that it is better not to fight the central bank.

The narrowing differential between Australian and US bond yields is not the only factor that frightens [AUDUSD][1] bulls. In Australia, only 1.2 million people, or 4.6% of the population, received at least one vaccine dose. For comparison, in the United States, 185 million people have been inoculated (56.5% of the population). If we take into account the fading of the credit impulse in China and the seasonal factor in the spread of the pandemic (summer is approaching in Europe, when the number of COVID-19 cases usually falls, in Australia it is winter), it becomes clear that the risks of developing an AUDUSD correction may increase.

Dynamics of [AUDUSD][1] and credit impulse in China

Source: Nordea Markets.

At the same time, no one is stopping Canberra from increasing the speed of vaccination. Prime Minister Scott Morrison said that Australia would receive 40 million doses of the Pfizer vaccine in 2021. The slowdown of the Chinese economy could ultimately play into the hands of the Aussie. If this happens, the official Beijing will seriously think about increasing incentives. Besides, the rising of iron ore prices close to their highs this year and the national economy’s strength can explain why hedge funds are still following longs on [AUDUSD][1].

Weekly [AUDUSD][1] trading plan

According to the NAB, Australia’s business environment, an indicator that considers hiring, sales, and profits, rose to an all-time high despite a cut in fiscal support. Bloomberg experts expect unemployment in Australia to fall to 5.7% in March, the lowest level since the start of the pandemic. The release of data on Australia’s PMI and China’s GDP for the first quarter are key events in the economic calendar for [AUDUSD][1]. In my opinion, a breakout of the resistance at 0.767 will be a signal to buy the pair with targets at 0.79 and 0.8.

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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