The downward trend continues and the Australian dollar is rapidly getting cheaper. The decline started well before the beginning of the coronavirus epidemic but this factor is crucial today.
This week, the AUD fell to the lowest level in 11 years, and may continue falling down. There is every reason to expect reaching the level of 0.6100 USD or lower. In 2002 the Australian dollar cost even cheaper, and these lows may also be quite real today in case the epidemic spreads, and due to the catastrophic impact of the virus on the Chinese economy which has yet to be assessed. At the same time, the economic downturn in Australia has not ended, and most likely next week we will get new disappointing data on the Australian economy. Also, next week reports on business activity in China for February will be published. Therefore, despite the fact that the rates have long been in the oversold zone, we believe that the minimum has not yet been reached, and there are no signs of consolidation. In turn, weak reports and new risks will motivate the RBA to urgently reduce the rate to support the economy.
The US economy looks much stronger against this background. The latest data on the real estate market and GDP confirms this. In addition, the USD is considered a safe asset in this particular case - at least until the virus becomes a problem for the US.
In this situation, we believe that the deals on the trend are still relevant in the short and medium term, which is confirmed by most technical analysis tools.
