Improved trading conditions due to the energy crisis, expectations of rapid GDP growth in the fourth quarter and an earlier hike in RBA rates, and an increased global risk appetite are beneficial for the AUDUSD and AUDJPY bulls. Let’s discuss this topic and make up a trading plan.

Monthly Australian dollar fundamental forecast 

There are always winners and losers. While the energy crisis is negatively affecting the economies of China and the eurozone countries, Australia benefits from its status as an energy exporter. High prices for coal and gas lead to a decrease in the production of metals and other raw materials and to an increase in their cost. As a result, the terms of trade in Australia are improving and the AUD is starting to look undervalued. These are not the only drivers of its growth.

Changes in terms of trade of the G10 currency-issuing countries


Source: Nordea Markets.

For 107 days until October 11, about 5 million Sydney residents were in lockdown. Once the adult vaccination rate reached 70%, the government lifted the restrictions. The end of the lockdown is a sure sign that Australia’s GDP in the fourth quarter will accelerate dramatically. This is a strong argument in favor of buying AUDUSD and AUDJPY. Business activity statistics can serve as a confirmation of this scenario. In October, the PMI in manufacturing and services reached 4-month highs, and the latter returned above the critical level of 50, indicating expansion.

Dynamics of business activity in the Australian services sector

Source: Trading Economics.

The end of the lockdown in Australia, positive statistics and preferences due to the energy crisis allow financial markets to test the Reserve Bank for strength. The RBA officials have repeatedly stated that they are not going to raise the cash rate before 2024. However, interest rate swaps signal that the rate may rise by 100 bps by the end of 2023.

For the first time since the end of February, the RBA intervened in the foreign exchange market, buying up 3-year bonds for AU$1 billion to reduce the yield to the target level of 0.1%. A few days before that, it exceeded 0.2%, but the intervention of the Reserve Bank brought everything back to normal. According to Reuters, the regulator holds about 62% of all securities maturing in 2024. Thus, investors will think twice before going ahead again.

Unlike the bond market, the situation is different in Forex. The improvement of trading conditions, business activity and growing global risk appetite (e.g. the S&P 500 has updated historical highs several times) are encourage AUD buyers. They are not confused by the derivatives market’s belief in the Fed’s monetary restriction in 2022, or by Goldman Sachs’ decline in China’s GDP forecasts for next year from 5.6% to 5.2%.

Monthly AUDUSD and AUDJPY trading plan

The upward AUDJPY trend looks especially strong against the background of the Fed’s monetary policy normalization and the situation on the US government debt market. The pair reached the targets at 83.6 and 86 indicated in the previous article, after which a correction occurred. It should be used to form or add up to longs in the direction of 88.4 and 89.4. AUDUSD is quite capable of rising to 0.77. The recommendation is to enter purchases. Strong statistics on Australian inflation for the third quarter may cause a rally.




Price chart of AUDUSD in real time mode

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