Will Australia go Down Under? Aussie Outlook

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Australia has avoided recession up to now. This week’s GDP could prove otherwise. In addition, a new interest rate and 3 more major events await the Australian dollar: Retail Sales, Building Approvals and Trade Balance. After AUD/USD reached 0.80, here are the things to look for this week.

Australia arguably has the strongest economy in the Western world. With GDP declining only once, a very high interest rate and robust trade with China, Australia doesn’t suffer too much from the global recession.

This week, 5 major indicators could set the direction of AUD/USD: Will it continue the upward trend? Or will it lay low?

  1. Retail Sales: This major indicator for the internal consumer mood in Australia is expected to remain positive, and rise by 0.5%, less than last time, but still strong. It’s published very early, at 1:30 GMT on Monday, while most traders are still enjoying the weekend. Despite it’s big importance, the early hour could weaken movements unless it’s a big surprise.
  2. Building Approvals: This is a good indicator for future economic changes in Australia. Also here, expectations are positive, at 2.1%, but shy of last month’s 3.5%. This figure is published on Tuesday at 1:30 GMT. Also here, the importance of this figure is overshadowed by the next release, which is much more important…
  3. Interest Rate decision: Australia has a Cash Rate of 3% – the highest in the West. The RBA has already surprised forex traders with its decisions, and sometimes defiance. The market expects no change for the interest rate. As in other places, the focus will move to the accompanying RBA Rate Statement. No Quantitative Easing is expected by the RBA. What’s important is the wording: optimistic or pessimistic. Or in other words: will there be rate cuts along the road, or maybe rate hikes? Answers on Tuesday at 4:30 GMT.
  4. GDP: As aforementioned, Australia has avoided recession up to now. Recession means two consecutive quarters of contraction. The Australian economy squeezed for the first time in the last quarter of 2008. It began late. Economists are pessimistic – they’re expecting a fall of 0.2% in GDP in the first quarter. After last quarter’s 0.5% fall, this means recession. If Australian avoids recession, the Aussie will fly up. Watch for big moves on Wednesday at 1:30 GMT.
  5. Trade Balance: Last but not least, Australian Trade Balance is predicted to show a surplus of 1.7 billion, smaller than 2.5 billion last time. Australia is dependant on commodity exports, especially to the Chinese giant. China’s stimulus plan proved successful. Will this influence the Australian Trade Balance? Answers on Thursday. Yup, at 1:30 GMT yet again.

These are the key events for the Aussie. The outstanding performance of the Australian economy is seriously tested this week. I feel that 0.80 is far from the end, and that AUD/USD can go much higher.

For further reading:

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

9 Comments

  1. Russell Melhem on

    Well said Yohay, I once saw an article on forex factory telling us to short the AUD,I warned the writer, Australia is a power house. 800 pips later my point is loud and clear. But I have made an important point below about FX right at the bottom.

    The AUD is not over printed like the Yen or USD.
    It has real assest backing. Commodities the stuff wall street hates. While Gold is going up the AUD will go up. They have the highest interest rates in the industrial world. Japan and china would do anything to keep the land down under happy.
    But here’s the killer blow, During the housing peak in 2001-03 it took 5 days to approve a home loan. Today it takes 28 days!!!!!!! Aussies are buying property like no tommorrow. The homes below $500,000 any way as the Government is giving away $14,000 to $24,000 home buyer grants.
    Let’s talk reality here.
    1. Japan is the worst RUN economy in the world with the highest debt in the world and the USA will not pay back their debts at TRUE VALUE.
    2. The GBP has made cow disease, no direction or logic. They will be forced to join an EU that will cut back it’s membership to 10 nations.
    3. The USD, someone start playing the death march everyone can see what is happening except the yanks.
    4. The EUD, if it was all German it would be the best currency in the world. However it is the Catholic church currency and the Catholic nations currency. Hence no Turks and England needs to start praying hail Mary. Give the EU an Army and they will rule the world. This is my currency of Choice and believe it will be the New World Order reserve currency of choice.

    5.The reality is not what is right but who has the most money to back their position until the opposite team gives up or switches side. Unfortuatley quantity will always beat quality in the FX world

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