Has the idea of a faster economic recovery in China compared to the United States and Europe and the reliance on currencies whose issuing countries are closely connected with the Celestial trade relations have become obsolete? Back in late March and in the first half of April, I strongly recommended buying the Australian dollar, contrary to the majority, speaking in horror of the grim prospects for the economy of the Green Continent and the ultra-soft monetary policy of RBA. Since then, the AUD / USD pair has managed to grow by more than 6 figures, however, Donald Trump's search for a scapegoat in Asia has confused all the cards with Ozzy fans.
Obviously, the owner of the White House really wants to win the November presidential election, but the recession and the collapse of the stock market greatly hinder this. And if the downtrend in the S&P 500 by the joint efforts of the Fed and the American administration was able to deploy, then with a V-shaped recovery of US GDP, serious problems are outlined. Trump urgently needed to find the guilty person, and he did not put off the matter in a long box. The escalation of the conflict with China will not only worsen the state of already on the verge of hysteria of international trade, but also will drown the titanic efforts to surface the economy of China and the yuan. The fall of the latter amid rumors about Washington preparing new import tariffs brought down AUD / USD quotes.
Dynamics AUD / USD and USD / CNY
Source: Trading Economics.
Yes, from a fundamental point of view, Ozzy looks vulnerable. According to Bloomberg estimates, the GDP of the Green Continent from the fourth quarter of 2019 to the beginning of a gradual recovery in October-December will decrease by 9% (by the end of 2020 - by 6%) and will not be able to restore lost ground until the second half of 2022. From the end of December, the number of people receiving benefits for Australian unemployment increased from 800 thousand to 1.3-1.6 million, which is likely to lead to an increase in unemployment from 5.2% to 11% over the next few months. This level occurred only during the last recession of the economy of the Green Continent in the early 1990s.
Australia's GDP dynamics
At the same time, most countries fighting the coronavirus are in a similar situation, while the fiscal stimulus in Australia (about 16% of GDP) is one of the most significant in the world, which allows us to hope for economic recovery. The reserve bank did not rush into battle with an open visor by analogy with the Fed, which launched an unlimited QE. He limited himself to targeting the yield curve by analogy with the Bank of Japan, which allowed to stop buying assets at week 6 (their total volume is estimated at a modest AU $ 50 billion).
Thus, hopes for a V-shaped GDP recovery in the Middle Kingdom, a large-scale fiscal stimulus and an insignificant increase in the RBA balance pushed AUD / USD quotes to a 7-week high, but resuscitation of the topic of trade wars changed the balance of power. If Donald Trump moves on from threats, a break of support at 0.635 will take the analyzed pair down. On the contrary, if there were rumors of new duties with a blank shot in the air, my forecast for the growth of the “Ozzy” to $ 0.675 and $ 0.69 will come true.