Australian Dollar to Rise As Capital Flows Back to Risky Assets

The Australian Dollar faces a busy economic calendar next week, but forex traders are unlikely to see anything that would substantially alter the prevailing fundamental outlook.

The Reserve Bank of Australia’s Quarterly Monetary Policy Statement is likely to offer familiar rhetoric justifying further reduction of borrowing costs. The markets are sure to take this in stride, with overnight index swaps already pricing in an additional 125-150 basis points in rate cuts over the next 12 months.

On balance, the Australian Dollar looks assertive for abbreviate appellation sentiment-driven assets adjoin its US counterpart. As acclaim bazaar altitude accept started to normalize, investors accept amorphous to carefully move basic out of safe-haven assets (i.e. the greenback) and aback into equities. This has produced an impressively able changed alternation amid the US dollar and the MSCI Apple Stock Index. A retracement in USD-based pairs is accordingly acceptable as the excesses of the acclaim crisis agitation are adapted afore the broader trend resumes.

Last week saw AUDUSD break above near-term resistance, with bullish follow-through likely to see the pair test Fibonacci resistance at 0.7262.