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Australian dollar forecast: AUD/USD weighs risks in APAC trade ahead of weekend


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Australian dollar under pressure amid extended Shanghai lockdown that threatens growth and the RBA’s financial stability review in focus as traders look to carry overnight momentum.

bg_aud_229435122.jpg
Source: Bloomberg
 
 

Friday’s Asia-Pacific outlook

Asia-Pacific markets are looking at a mixed open after concerns over central bank tightening subsided overnight. US stocks pushed higher, with the benchmark S&P 500 index rising 0.42% in New York, ending a two-day losing streak. Bond traders ditched Treasuries, more so along the long end of the maturity spectrum, which steepened key yield curves. The US Dollar Index (DXY) pushed higher into multi-year highs despite the risk taking. That dollar strength is working against the Australian Dollar this morning.

The lockdown in Shanghai, China, which is in its second week, is also dampening sentiment across the APAC region. The extended shutdown, with no sight in end, has weighed on metal prices as factories sit idle in the country’s largest city. That hurts the Australian dollar, given the amount of trade Australia does with China. That said, yesterday’s weaker-than-expected trade balance appears to be providing another headwind to AUD/USD prices.

Oil prices fell again for the WTI and Brent benchmarks. The extended Shanghai lockdown is likely starting to eat into growth prospects. That, along with a larger-than-expected inventory build in the United States, may see weakness continue in the short term. Meanwhile, the European Union continues to spare over the exact details of banning Russian coal, but the latest reports suggest policymakers favor pushing such a ban back to mid-August.

This morning, South Korea’s current account balance for February crossed the wires at $6.42 billion, up sharply from $1.81 billion. Japan will follow this morning with its own account balance for the same period. Analysts expect that figure to come across at 1.4 trillion yen. Traders will also be digging into the Reserve Bank of Australia’s financial stability review due out at 01:30 GMT. The weekend may have traders opting not to hold risky assets, given the rapidly changing situation in Ukraine.

AUD/USD technical forecast

AUD/USD prices are more than 2% lower from the multi-year high of 0.7661, set earlier this week. The 23.6% Fibonacci retracement appears to be underpinning prices. A drop below that level would threaten the rising 20-day Simple Moving Average (SMA). Alternatively, a rebound would bring the 23.6% Fib into view and the 2022 high above that.

AUD/USD daily chart

AUD/USD daily chart
Source: TradingView

Follow Thomas Westwater on Twitter @FxWestwater

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Thomas Westwater | Analyst, DailyFX, New York City
08 April 2022

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