Australian Dollar Forecast: What Will Drive AUD/USD?

AUD/USD Chart

AUTRALIAN DOLLAR FORECAST: NEUTRAL

The central banks made their demands public this week, while the Chinese government has been cautious about its over-indebted debt. Commodity prices continued to fluctuate with specific sector themes. Long-term bond yields are starting to emerge, but the focus on the AUD / USD pair will be on the difference.

The FOMC set market expectations for the week, and the Federal Reserve will announce a moratorium on bond purchases in November. The RBA minutes appear to confirm that current monetary policy will remain in place until February 2022. With both central banks moving in the same direction, the forex markets have moved in the direction of wider diversification.

The The central banks made their demands public this week, while the Chinese government has been cautious about its over-indebted debt. Commodity prices continued to fluctuate with specific sector themes. Long-term bond yields are starting to emerge, but the focus on the AUD / USD pair will be on the difference.

The FOMC set market expectations for the week, and the Federal Reserve will announce a moratorium on bond purchases in November. The RBA minutes appear to confirm that current monetary policy will remain in place until February 2022. With both central banks moving in the same direction, the forex markets have moved in the direction of wider diversification.

The Evergrande saga is having an impact on the markets as some bond coupons have been paid and some have yet to be paid. There is still great uncertainty about what will happen next. The market perception is that the Chinese government will take steps to prevent the spread, but investors will be hurt. saga is having an impact on the markets as some bond coupons have been paid and some have yet to be paid. There is still great uncertainty about what will happen next. The market perception is that the Chinese government will take steps to prevent the spread, but investors will be hurt.

The extent of the overgrowth losses can determine the price of risk sensitive assets, and the AUD / USD pair will be vulnerable to these emotional changes.

Iron ore prices have stabilized after the sale on Monday, but are still a long way from their highs earlier this year. As Chinese demand falls, the commodity may also have lower levels. However, a price below $ 80 per ton becomes useless to marginal producers, which can hinder supply.

While iron ore is the center of the Australian dollar foreign exchange market, Australia’s exports of oil, gas, coal and liquefied natural gas (LNG) make up a large portion of its export revenue. These energy markets persist amid many supply bottlenecks that are unlikely to be resolved in the foreseeable future.

After the Federal Open Market Committee meeting, the US yield curve narrowed with the support of long-term bonds. The Australian Treasury’s 10-year return follows the same pattern, and the US Treasury’s 10-year profit margin is moving towards parity. It could support the AUD / USD pair if Australian rates are higher than US rates.

Looking ahead, Australian retail sales are expected on Tuesday and building permits will be released on Thursday. The United States regards Thursday’s GDP data as unemployment claims.

AUD/USD AGAINST AUSTRALIA-US 10-YEAR YIELD SPREAD

Australian Dollar Outlook: China, Energy and Yields in Play. What Will Drive AUD/USD?

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX