Fundamental Forecast for the Australian Dollar: Neutral
- RBA likely to maintain status quo, Chinese PMI data may pass quietly
- Impact of US news on risk trends biggest Aussie Dollar volatility risk
- To see the 2016 outlook for AUD/USD, check out our Trading Guides
The Australian Dollar continued to recover for second week, bolstered by better-than-expected inflation data and firming market-wide risk appetite. The former weighed against RBA interest rate cut expectations while the latter fueled demand for higher-yielding assets, offering support to the sentiment-linked currency. Looking ahead however, upside follow-through may be compromised as a relentless stream of high-profile event risk promises to unleash sharp volatility.
The BoJ refreshed the global central bank discussion this past week after announcing negative rates. And, risk-oriented markets gained as they have in years past. Is this a return to familiar trends or a false dawn?
Fundamental Forecast for Dollar: Neutral
- The next FOMC decision is scheduled for March 16; and there is a wide gulf between the market’s and Fed’s outlook
- Top event risk on the US docket are the January labor statistics and the Fed’s preferred inflation reading for December
- See our 1Q 2016 forecast for the US Dollar in our Trading Guides page.
The USDollar closed at a fresh 12-year high this past week. Yet, the occasion of breaching such exceptional heights has repeatedly disappointed over the past year. For the Greenback, ‘breakouts’ have chronically lacked follow through. This isn’t just a technical shortfall, rather it is a sign of the lackluster fundamental drive behind the market. Divergent rate expectations, rising market volatility and a shift to consumer economies have all benefit the benchmark currency. However, this is not an endless well of strength. To project the Dollar further on already extended moves like those seen with EURUSD, GBPUSD and AUDUSD; a tangible upgrade is needed. Will we find it on the coming week’s docket or headlines?
Fundamental Forecast for EUR/USD: Neutral
– EUR/USD slumped after the BOJ shocked and awed markets on Friday.
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The United States Federal Reserve (FED) has one of the greatest if not the greatest impact on financial markets and should always be on a trader’s radar and listed on their financial calendar regularly.
- Aussie Dollar Volatility Seen on China, US, Eurozone Event Risk
- Australian Dollar Continues to Face China-Driven Risk Aversion Threat
- Upbeat Jobs Data May Trim RBA Rate Cut Outlook, Cap Aussie Losses
- Find Critical Turning Points for the Australian Dollar with DailyFX SSI
The Australian Dollar dropped to finish last week at the lowest levels in nearly seven years as aggressive risk aversion battered the sentiment-linked currency. The S&P 500 – a benchmark for market-wide risk appetite – fell for a second consecutive week to record the largest such losing streak since November 2011. Commodity prices also continued to sink, with a host of aggregate benchmarks of raw materials prices sinking to multi-year lows.The week ahead offers ample opportunities for the rout to continue.
The foreign exchange market Forex- FX, or currency market
Forex is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of volume of trading, it is by far the largest market in the world. The main participants in this market are the larger international banks. Financial centres around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.