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Australian dollar price forecast 28 June 2021 | AUDUSD Fundamental analysis

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The Reserve Bank has taken a dovish stance, China continues to be offended, and further growth of commodity prices look doubtful. How can AUDUSD price not correct in such a situation? Is the uptrend broken? Let us discuss the Forex outlook and make up a trading plan

Weekly Australian dollar fundamental forecast

Nothing lasts forever. Both the bad and the good. In March, the Aussie exceeded the $0.8 mark for the first time since the beginning of 2018. The Aussie strengthened by 45% over the previous 12 months due to the successful fight against COVID-19, the absence of a recession in China, and a strong rebound in commodity prices. In the second quarter, investors had serious doubts about the viability of the old AUD drivers, which led to the AUDUSD price consolidation. A leading Australia is gradually becoming an outsider.

Australia, which previously successfully fought the pandemic, is now under fire for slow vaccination. Occasional coronavirus outbreaks are forcing Canberra to impose new restrictions, undermining the government and the Reserve Bank’s efforts to recover the country’s economy. Australia’s “Covid-zero“ strategy has not been as effective as the introduction of vaccines in the US, UK, and EU.

Of course, Australia can boast of a return to the trend in the labor market and record growth in energy and mining export revenues to AU$334 billion in the 2020/2021 fiscal year. However, these factors have already been taken into account in the AUDUSD prices, and the position of the RBA and government forecasts do not allow us to expect that they will continue to create favorable conditions for the bulls.

The Reserve Bank of Australia, unlike the Fed, is not going to raise the rate in 2022-2023. Despite the recovery in the labor market, inflation in Australia is growing extremely slow. It can be assumed that the minimum labor underutilization over the past 8 years will ultimately push wages and consumer prices up. But the RBA officials are not worried about this yet. They are ready to remain passive, as the Fed officials did until June. 

Dynamics of labor underutilization and wages in Australia

  

Source: Bloomberg.

After reaching a record peak, the government expects revenues from electricity and mining exports to fall to $AU304 billion in fiscal 2022/2023 due to lower iron ore prices and tensions with China, which accounts for about 45% of all shipments. Over the past few months, Canberra and Beijing have already filed three WTO lawsuits for violating the organization’s rules. Do not forget about the slowdown in China’s GDP growth, which is likely to be reflected in the June PMI data, as well as China’s intention to halt the rally in commodity prices by selling strategic stocks.

Weekly AUDUSD trading plan

Thus, lockdowns, slow vaccination rates, the RBA’s dovish stance, declining prices for mining products and export revenues, conflict with China, as well as a change of Fed’s stance don’t bode well for ​​restoring the AUDUSD uptrend. Selling the pair following the breakout of the support at 0.7685 has already yielded profits. I believe that traders should enter short trades when the price rebounds from resistances at 0.76, 0.7645, and 0.7705.

   

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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