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Fundamental Australian Dollar Forecast: Neutral AUD/USDgained on a more dovish Fed, but its own low interest rates still weigh on it There are signs that those back to back RBA rate cuts aren't helping much This week will bring more clues
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TheAustralian Dollarmarket was focused like all others on the Federal Reserve last week, but the currency was unable to capitalize much onapparently intact prospects for lower US interest rates .
The Aussie remains quite close to its lows for the year against the Greenback, having itself endured the firstback-to-back monthly rate cutsfrom the Reserve Bank of Australia since 2012. One problem is that this action doesn't seem to be having the desired effect. Westpac's consumer confidence index hit a two-year low in July, despite those rate cuts, the passage of a huge tax cut through parliament and signs of stabilization in the key housing markets of Sydney and Melbourne.
The coming week will bring three obvious scheduled points of economic interest. Investors will get a look at the minutes of that last RBA policy meeting. As a trading opportunity this could go either way, annoyingly. For sure a rate cut was delivered but the central bankhas been notably cautiousabout the likely boost provided by lower rates now, given that consumers have been dealing with a series of record-low borrowing costs since 2012. If there's more musing of this sort the Aussie might get some support.
Thursday will bring official employment statistics, with continued strength here very likely to please Aussie bulls. This metric has always been key to RBA thinking, naturally, but the central bank hasplaced special emphasison it in the last couple of months. Ongoing strength in job creation will likely see rate cut bets pared.
Official Chinese Gross Domestic Product figures for the fourth quarter are also due, so Monday could see the Australian Dollar in its sometime role as foreign exchange's favorite liquid China proxy. This might be less good news for the bulls as trade friction with the US is expected to bite. Annualized growth is expected to be around 6.2%. That would be a thirty-year low. Still, that forecast has been in the market for sometime and may very well already be in the price too.
Given all of the above and the fact that overall focus is likely to remain firmly on how the market thinks about US monetary policy at any given time, next week looks as it if could see plenty of movement in AUDUSD, but perhaps not enough in either direction to change the game.
Therefore, it's got to be a neutral call overall, but with no break likely yet in the pair's overall downward bias.
Australian Dollar Resources for Traders
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--- Written by David Cottle, DailyFX Research
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