This is one of the most talked about currencies in FX recently. Expectations have always been surrounding it and have quite often missed out on those expectations. The Australian Dollar still is one of the talking points and looks to stay just as famous in the future market with mixed AUD to USD forecast from numerous experts worldwide.
Australia has always had a topsy-turvy journey as far as the global economy is concerned. Still, it is considered as a first-choice investment by many FX traders when it comes to a long-term commitment or financial asset. And although the future does not seem to be too bright as per recent studies, AUD to USD forecast has always had that silver-lining to it.
Looking back in History:
“It is the past which leads the way to the present and decides the future” – couldn’t be truer especially in the case of the Aussies. Trading in AUD was once reminiscent of those times of gold hunts into the Australian outback. AUD rose to values exceeding that of USD; a happenstance which was not to be repeated again and with bitter repression. There were multiple reasons for this growth, and one of the foremost reasons was Australia’s huge mineral reserves.
“All that glitters is not gold” and Aussies proved this with their mineral exports ranging from numerous metals. The Aussie economy burst onto the scene primarily due to a coinciding Chinese industrial mega-growth; they fed this upcoming Chinese economy with raw materials with the similar fervor. AUD to USD forecast reached unforeseen heights as USD remained unable to match up to China’s meteoric rise into the global market.
But the explosion was short-lived; it turned out to be more of a balloon than a permanent outcome. A commodity boom in the 2000s was quickly succeeded by a flip-side which brought AUD down again. Since then it has always been fluctuating between hope and stagnancy. Since then, AUD to USD forecast has always been too volatile and uncertain for many traders who avoid it due to the increased risk percentage attached to it.
Volatility of AUD:
Volatility in the case of FX refers to the variation in points of a currency pair. On a daily scale, AUD to USD forecast does not exceed beyond normative pip range of 80-100 pips per day. What make it volatile are sudden depreciative lunges. There are a few noteworthy reasons attached to this extreme volatility, viz. –
- Dependency on the global market –
One of the primary sources of income for Australia is their raw materials exports. They are one of the largest global mineral exporters in terms of gross amount and variety. Considering crude oil among this list of exports, nearly 15% of Australian GDP is dependent on these exports. Now it is obvious that the global market is subject to price variations with their own set of variables (described later).
More than 75% of Australian exports as per gross value are through maritime trading. Trading via sea is fraught with counter-productive situations. These factors combine to affect the Australian economy hugely and subsequently on AUD to USD forecast too.
- Excessive dependency on Mining –
Australia along with countries like South Africa, Ukraine and Guinea rely heavily on their mining corps. Compared to the geographical size of the other leading mining countries China and Russia, these countries have a higher density of mining. With reserves worth more than $700 billion, Australia looks to the future with them.
But the catch lies elsewhere; the Committee for Economic Development of Australia (CEDA) suggests that the mining boom has already reached 70% of its tenure and will look to recede in the recent future. This hangs like a black cloud on the horizon for the Aussies and a primary reason of poor and uneventful AUD to USD forecast.
- Depreciating Chinese growth –
China has emerged as one of the foremost economic superpowers with the USA waning against them. The first decade of this 21st century saw China recording 14.2% growth in GDP (billions) mounting an offensive towards the Americans. Chinese industrial growth was powered majorly by Australian raw material imports with the latter recording a subsequent growth.
Coming to present times, China’s growth has receded to a low 7% forecast in the coming year mirroring the same from the previous ones. This has allowed USD to fight back and Australia could only watch their dollar tumble against them with weak AUD to USD forecast.
AUD USD rate forecast rates a final support level at 0.71. There are expectations for an initial resistance around a 0.82 mark in the upcoming weeks with a strong speculative sentiment index (SSI) around 1.5 will increase throughout the time till around an expected 3.5+. Investments into AUD will increase with the price quote to hover at an absolute maximum of .85 and a minimum of .72 at closing with the persisting conditions.
Future AUD to USD forecast:
To ascertain a specific comment on this subject would be taking too large a risk given that the pair itself is overwrought with it. A determinate speculation would be inconclusive although the factors which will come into play may help gain an idea of it. Listing these factors below: -
- RBA cutting rates –
The Reserve Bank of Australia has already cut interest rates to an all-time low of 1.5%. And although this will send AUD tumbling at first, it will also help garner bullish Aussie investment and give it a momentum in the future. With Fed’s looking for rate hikes in the future, RBA rate cuts will give a good boost to AUD to USD forecast.
- South and Southeast Asian industrial growth –
South Asia has turned out as the leading growing region in the global economy. Lower crude prices have aided countries like India, Taiwan, and Pakistan in registering strong growth figures. And the requirements for raw imports give Australian mining that high demand coefficient for better pricing.
- High Yield/Production –
Australia registered a strong 3.2% Q2 growth and looked set to exceed that later on with increasing production and growth in agriculture, livestock, education, etc. sectors. Also, the governments’ investment into manufacturing may provide it with bullish investments for better future prospects. Continuity in this direction will give the Aussies strength to avoid volatile down-surge irrespective of any future volatile situation. Stronger AUD to USD forecast is expected.
International relations often have adverse effects on Australia:
Maritime trading is subject to traversing international waters and any problematic situation relating to international relations would cause trading to come to a complete standstill. The recent IR stalemate surrounding the South China Sea closed one of the most important oceanic trade routes for Australia and South Asia alike marked by a conclusive slump in AUD USD rate forecast.
The global raw material market is increasingly driven by demands and thus is characterized by sharp price changes. Australia heavy dependency on this market and the humongous mineral production from South Africa has caused havocs to Aussie mining corporations. Only upcoming economies like those of Taiwan have provided a steady demand with more promise for the future.
Is there a silver lining?
Irrespective of the fluctuations and uncertainties, AUD to USD forecast does have a probability of profit added to them with the future being not as bleak as some experts in the field suggest. Australia has had the shorter end of the straw for quite some time, and an increased probability of a better future outcome will not be surprising. The government shares the responsibility for this upsurge with increased investment in new prospects and lowered interest rates to attract investments aimed at helping the economy out. Better AUD USD rate forecast may be closer to the horizon than many would expect given the current scenario.
With excessively productive purchasing power parity (PPP) and high living standards, Australia has gone through the worst in the first decade of this century. Investment into newer fields is encouraged by the government with pro-manufacturing strategies. The Aussies may just be the financial dark horse of the coming decade and for an FX trader, AUD to USD forecast has more than the required probabilities for a long-term profit.
Invest. Profit. Prosper.