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Australian Dollar continues downtrend amidst trade war concerns, low interest rates

Published on: 11/5/18 11:34 AM

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Category: Currency, Forex, Market, Trading, World News

AUD continues downtrend


The Australian Dollar (AUD) continues its downtrend path on the charts with a bearish forecast in place. This sentiment towards the currency arrives even though there are a number of economic reports or data that will be revealed within the next week.

On Tuesday and Wednesday, traders will get a look at reports for consumer and business confidence. Also, since Australia has ties to China in terms of exports, there will be a lot of attention to private service-sector performance in China, as well as overall trade reports.

AUD/USD


Despite upcoming data which could be well-received, the AUD/USD pair is trading near lows that were last seen back in February of 2016. It’s continued to stay on the daily-chart downtrend for most of this current year too. The United States’ rising interest rates are part of the reason for the underlying weakness in the pair.

The key Official Cash Rate has remained near 1.50 percent thanks to the Reserve Bank of Australia. However, the United States has raised interest rates a total of eight times going back to 2015. That has created a gulf between Australia and the US in terms of the rates.

One of the main things that could change this is if there were any indications of an “inflation uptick” within the Australian economy. This could lead to the speculation over higher interest rates being priced into the market. However, there isn’t any indication of data coming which could provide this sort of momentum.

Global risk appetite due to trade conflict news is also an aspect that affects market action on a daily basis. With any negative headlines out of China or the US regarding the trade situation, it could cause the global risk appetite revived. This could also impact the Australian Dollar since it is considered a growth-related currency.

Global risk


Over the past year, the chart shows a steady decline in the currency when paired versus the US Dollar. As of October 6, 2017, the AUD was around $0.78 USD each. As of this report, an AUD is hovering at $0.71 USA.

All of that said, the sentiments towards any sort of boost for the AUD this week appear to be bearish. Traders will wait and see if there is any possible driving force that finally arrives to change the situation, but as of now, don’t be surprised to see a downtrend continue in the coming weeks.