ECONOMIC ANALYSIS LONG NOW
Fundamental Economic State
Australia:
GDP Growth:
Latest data shows Australia’s GDP grew by 0.5% QoQ in Q1 2024, indicating a moderate expansion.
Annual growth rate stands at 2.1%, reflecting steady economic performance.
Implications: A stable GDP growth supports a stronger AUD, as it indicates economic resilience.
Employment Data:
Unemployment rate: 3.9% as of April 2024.
Employment change: +30,000 jobs in April 2024.
Implications: Strong employment figures bolster consumer spending and economic confidence, positively impacting AUD.
Inflation Rate:
CPI YoY: 4.2% in Q1 2024.
Core inflation remains elevated at 3.8%.
Implications: Higher inflation may prompt the RBA to consider tightening monetary policy, supporting the AUD.
Retail Sales:
Retail sales rose by 1.2% MoM in April 2024.
Implications: Increased consumer spending signals economic health, strengthening AUD.
Trade Balance:
Trade surplus of AUD 12.5 billion in April 2024.
Implications: A strong trade surplus supports AUD due to higher demand for Australian exports.
Consumer Confidence:
Consumer confidence index: 103.5 in May 2024.
Implications: Positive consumer sentiment encourages spending and investment, favorable for AUD.
United States:
GDP Growth:
US GDP grew by 1.4% QoQ in Q1 2024.
Annual growth rate at 2.5%.
Implications: Strong GDP growth supports USD as it reflects economic strength.
Employment Data:
Unemployment rate: 3.6% as of April 2024.
Non-farm payrolls: +250,000 jobs in April 2024.
Implications: Robust employment data reinforces USD strength due to higher economic activity.
Inflation Rate:
CPI YoY: 4.5% in April 2024.
Core inflation at 4.0%.
Implications: Persistent inflation may lead the Fed to continue its tightening cycle, supporting USD.
Retail Sales:
Retail sales increased by 1.3% MoM in April 2024.
Implications: Higher retail sales reflect strong consumer demand, positive for USD.
Trade Balance:
Trade deficit of USD 70 billion in April 2024.
Implications: A trade deficit can weaken USD due to higher imports than exports.
Consumer Confidence:
Consumer confidence index: 110.0 in May 2024.
Implications: High consumer confidence supports economic growth, favorable for USD.
Fiscal Policies:
Australia:
The Australian government has introduced fiscal measures aimed at boosting infrastructure spending and providing tax relief.
Implications: Expansionary fiscal policy can stimulate economic growth, supporting AUD.
United States:
The US government continues with its infrastructure plan and has proposed additional fiscal stimulus.
Implications: Increased government spending can boost economic growth, supporting USD.
Daily Percentage Changes
Past Month Analysis:
April 28 - May 27, 2024:
Daily percentage changes ranged between -0.5% and +0.6%.
Significant movements correlated with key economic data releases and geopolitical events.
Example: On May 5, AUD/USD rose by 0.6% following positive Australian retail sales data.
Example: On May 12, AUD/USD fell by 0.5% due to a stronger-than-expected US non-farm payrolls report.
News Analysis
Recent Events Impacting AUD/USD:
RBA Monetary Policy Meeting:
The RBA decided to maintain the cash rate at 3.85% on May 6, 2024.
Impact: Market reaction was muted as the decision was in line with expectations, keeping AUD/USD stable.
Federal Reserve Meeting:
The Fed raised interest rates by 25 basis points to 5.25% on May 3, 2024.
Impact: USD strengthened on the back of the rate hike, leading to a decline in AUD/USD.
Geopolitical Developments:
Ongoing trade tensions between the US and China have impacted market sentiment.
Impact: AUD, being a proxy for global risk appetite, weakened against USD during heightened tensions.
Interest Rate Expectations
Reserve Bank of Australia (RBA):
Current cash rate: 3.85%.
Market expects a potential rate hike in Q3 2024 if inflation remains elevated.
Historical trend: The RBA has been cautious in its approach, focusing on economic stability.
Federal Reserve:
Current federal funds rate: 5.25%.
Market anticipates further rate hikes if inflation does not ease.
Historical trend: The Fed has been aggressive in combating inflation, with multiple rate hikes in the past year.
Commodity Prices and Market Sentiment
Commodity Influence:
Iron Ore:
Price: USD 120 per ton.
Australia’s major export, influencing AUD strength.
Coal:
Price: USD 95 per ton.
Strong demand from Asia supports AUD.
Gold:
Price: USD 1,950 per ounce.
Safe-haven asset; higher prices can support AUD.
Market Sentiment:
Current sentiment is mixed, with concerns over global economic slowdown impacting risk assets.
Implications: Risk aversion can lead to USD strength due to its safe-haven status, pressuring AUD.
Projection Figures
Current Price Consideration:
Current AUD/USD Price: 0.6700 (as of May 27, 2024).
Short-Term Projection (1-3 months):
Projection: 0.6800.
Rationale: Expected rate hike by the RBA and stable economic data support a slight appreciation.
Long-Term Projection (6-12 months):
Projection: 0.7000.
Rationale: Improved trade balance and robust economic growth in Australia coupled with potential Fed rate stabilization.
Trade Ideas
Short-Term Trade Idea:
Position: LONG AUD/USD.
Entry: 0.6700.
Target: 0.6800.
Rationale: Anticipation of positive economic data and RBA rate hike.
Long-Term Trade Idea:
Position: LONG AUD/USD.
Entry: 0.6700.
Target: 0.7000.
Rationale: Stronger economic fundamentals in Australia and potential stabilization of US interest rates.
Additional Considerations
Global Macroeconomic Trends:
Trade wars, pandemics, and geopolitical shifts remain significant factors.
Seasonal trends and historical patterns suggest AUD tends to perform well during periods of global economic recovery.
Summary:
Based on the comprehensive analysis, the projection for the AUD/USD exchange rate is as follows:
Short-Term Projection: 0.6800.
Long-Term Projection: 0.7000.
These projections are based on current economic data, interest rate expectations, commodity price trends, and market sentiment. Specific trade ideas provided offer clear entry and target rates, supporting informed decision-making.
Australia:
GDP Growth:
Latest data shows Australia’s GDP grew by 0.5% QoQ in Q1 2024, indicating a moderate expansion.
Annual growth rate stands at 2.1%, reflecting steady economic performance.
Implications: A stable GDP growth supports a stronger AUD, as it indicates economic resilience.
Employment Data:
Unemployment rate: 3.9% as of April 2024.
Employment change: +30,000 jobs in April 2024.
Implications: Strong employment figures bolster consumer spending and economic confidence, positively impacting AUD.
Inflation Rate:
CPI YoY: 4.2% in Q1 2024.
Core inflation remains elevated at 3.8%.
Implications: Higher inflation may prompt the RBA to consider tightening monetary policy, supporting the AUD.
Retail Sales:
Retail sales rose by 1.2% MoM in April 2024.
Implications: Increased consumer spending signals economic health, strengthening AUD.
Trade Balance:
Trade surplus of AUD 12.5 billion in April 2024.
Implications: A strong trade surplus supports AUD due to higher demand for Australian exports.
Consumer Confidence:
Consumer confidence index: 103.5 in May 2024.
Implications: Positive consumer sentiment encourages spending and investment, favorable for AUD.
United States:
GDP Growth:
US GDP grew by 1.4% QoQ in Q1 2024.
Annual growth rate at 2.5%.
Implications: Strong GDP growth supports USD as it reflects economic strength.
Employment Data:
Unemployment rate: 3.6% as of April 2024.
Non-farm payrolls: +250,000 jobs in April 2024.
Implications: Robust employment data reinforces USD strength due to higher economic activity.
Inflation Rate:
CPI YoY: 4.5% in April 2024.
Core inflation at 4.0%.
Implications: Persistent inflation may lead the Fed to continue its tightening cycle, supporting USD.
Retail Sales:
Retail sales increased by 1.3% MoM in April 2024.
Implications: Higher retail sales reflect strong consumer demand, positive for USD.
Trade Balance:
Trade deficit of USD 70 billion in April 2024.
Implications: A trade deficit can weaken USD due to higher imports than exports.
Consumer Confidence:
Consumer confidence index: 110.0 in May 2024.
Implications: High consumer confidence supports economic growth, favorable for USD.
Fiscal Policies:
Australia:
The Australian government has introduced fiscal measures aimed at boosting infrastructure spending and providing tax relief.
Implications: Expansionary fiscal policy can stimulate economic growth, supporting AUD.
United States:
The US government continues with its infrastructure plan and has proposed additional fiscal stimulus.
Implications: Increased government spending can boost economic growth, supporting USD.
Daily Percentage Changes
Past Month Analysis:
April 28 - May 27, 2024:
Daily percentage changes ranged between -0.5% and +0.6%.
Significant movements correlated with key economic data releases and geopolitical events.
Example: On May 5, AUD/USD rose by 0.6% following positive Australian retail sales data.
Example: On May 12, AUD/USD fell by 0.5% due to a stronger-than-expected US non-farm payrolls report.
News Analysis
Recent Events Impacting AUD/USD:
RBA Monetary Policy Meeting:
The RBA decided to maintain the cash rate at 3.85% on May 6, 2024.
Impact: Market reaction was muted as the decision was in line with expectations, keeping AUD/USD stable.
Federal Reserve Meeting:
The Fed raised interest rates by 25 basis points to 5.25% on May 3, 2024.
Impact: USD strengthened on the back of the rate hike, leading to a decline in AUD/USD.
Geopolitical Developments:
Ongoing trade tensions between the US and China have impacted market sentiment.
Impact: AUD, being a proxy for global risk appetite, weakened against USD during heightened tensions.
Interest Rate Expectations
Reserve Bank of Australia (RBA):
Current cash rate: 3.85%.
Market expects a potential rate hike in Q3 2024 if inflation remains elevated.
Historical trend: The RBA has been cautious in its approach, focusing on economic stability.
Federal Reserve:
Current federal funds rate: 5.25%.
Market anticipates further rate hikes if inflation does not ease.
Historical trend: The Fed has been aggressive in combating inflation, with multiple rate hikes in the past year.
Commodity Prices and Market Sentiment
Commodity Influence:
Iron Ore:
Price: USD 120 per ton.
Australia’s major export, influencing AUD strength.
Coal:
Price: USD 95 per ton.
Strong demand from Asia supports AUD.
Gold:
Price: USD 1,950 per ounce.
Safe-haven asset; higher prices can support AUD.
Market Sentiment:
Current sentiment is mixed, with concerns over global economic slowdown impacting risk assets.
Implications: Risk aversion can lead to USD strength due to its safe-haven status, pressuring AUD.
Projection Figures
Current Price Consideration:
Current AUD/USD Price: 0.6700 (as of May 27, 2024).
Short-Term Projection (1-3 months):
Projection: 0.6800.
Rationale: Expected rate hike by the RBA and stable economic data support a slight appreciation.
Long-Term Projection (6-12 months):
Projection: 0.7000.
Rationale: Improved trade balance and robust economic growth in Australia coupled with potential Fed rate stabilization.
Trade Ideas
Short-Term Trade Idea:
Position: LONG AUD/USD.
Entry: 0.6700.
Target: 0.6800.
Rationale: Anticipation of positive economic data and RBA rate hike.
Long-Term Trade Idea:
Position: LONG AUD/USD.
Entry: 0.6700.
Target: 0.7000.
Rationale: Stronger economic fundamentals in Australia and potential stabilization of US interest rates.
Additional Considerations
Global Macroeconomic Trends:
Trade wars, pandemics, and geopolitical shifts remain significant factors.
Seasonal trends and historical patterns suggest AUD tends to perform well during periods of global economic recovery.
Summary:
Based on the comprehensive analysis, the projection for the AUD/USD exchange rate is as follows:
Short-Term Projection: 0.6800.
Long-Term Projection: 0.7000.
These projections are based on current economic data, interest rate expectations, commodity price trends, and market sentiment. Specific trade ideas provided offer clear entry and target rates, supporting informed decision-making.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.