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Australian Dollar Outlook Bearish as Coronavirus Cases Spike

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Fundamental Forecast for AUD: Bearish

  • Australian Dollar surge towards its major counterparts can be at an end, as neighborhood Covid-19 cases spike
  • RBA Texas chief Lowe’s timid attempts with jawboning the local currency may possibly intensify with deteriorating fundamentals
  • Tensions with China could think about on AUD moving forward

Coronavirus Case Spike Threatens Fiscal Progress

A fresh outbreak associated with coronavirus cases in Australia’s second most populous condition threatens the outlook for that Australian Dollar, should the hold efforts halt the re-opening of the local economy.

With the number of coronavirus cases within Victoria rising by two times digits for the last 10 days and nights, State Premier Dan Andrews warned “what we accomplish now will determine what will come next”.

Stressing the precariousness of the situation as “we again find ourselves over a knife’s edge”, Andrews features called upon the Australian Protection Force to assist in the ‘Suburban Testing Blitz” program the fact that aims to conduct 10,000 test a day over the subsequent 10-day period.

Increased tests inevitably leads to climbing circumstance numbers and, with the Top already deciding to wait easing of restrictions by way of a further three weeks, a exponential increase could result in often the re-imposition of economically disastrous lockdown measures.

Daily virus cases

Source – SBS Labs

RBA Governor Lowe “Would Like a Lower Currency”

In a speech provided to the Crawford School associated with Public Policy, Reserve Financial institution of Australia Governor Phillip Lowe stated he “would like a lower currency regarding macroeconomic outcomes” as “it would help reduce unemployment and even lift inflation closer to target”.

However, the Governor conceded “at the moment, I think it’s really hard to argue that the Australian Dollar is overvalued” citing “relatively good health and fiscal outcomes so far” as a major fact in driving a vehicle the exchange rate bigger.

The central bank’s position that interest rates will remain “at their current level to get years” has also contributed to often the recent outperformance of the Australian Dollar, with the RBA preserving 0.25% as the low bound for the official income rate and the possibility of bringing out a Negative Interest Rate Policy (NIRP) “extraordinarily unlikely”.

Nonetheless, need to coronavirus cases continue to ascend, and the local economy find it hard to bounce back as expected, often the RBA may be forced to change their position on bad interest rates.

Australia-China Trade Tensions

Souring of the relationship with Australia’s largest trading partner features continued to escalate recently weeks, resulting in the imp?t of tariffs on neighborhood agricultural products and the suggestion that Chinese citizens steer clear of travel to Australia due to “racist incidents”.

The latest change has seen government resources confirm China as to blame behind “intensifying online episodes targeting Australian organizations all over a range of sectors, including all of levels of government”.

Prime Ressortchef (umgangssprachlich) Scott Morrision announced these kind of cyber attacks were “ongoing” and have been intensifying since the coronavirus outbreak, although he ceased short of confirming China as the culprit.

With Beijing’s dedication to have the ‘final word’ generally there remains a significant possibility the fact that further escalation may be for the cards, in turn capping prospective upside for the risk-associated Australian Dollar.

Furthermore, the local currency’s sensitivity to global trade developments may also intensify offering pressure, as US-China trade relations continue to remain vitriolic at best.

AUD Remains To cap it By Key Resistance

Australian Dollar Chart

Source – TradingView

From a technical standpoint AUD remains capped by the 2012 downtrend, which has consistently acted as a pivotal inflection point for the cyclerapidsensitive Australian Dollar.

To the fact that end, deteriorating fundamentals may possibly impose increasing downward force on AUD against their major counterparts, and may sign the end to the commodity-linked currency’s surge to pre-crisis amounts.

— Written by Daniel Moss

Follow me on Twitter at @DanielGMoss

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