AUD/USD Monthly Fundamental Forecast – April 2016

The AUD/USD closed the month at 0.7667 well above the RBA’s expectations as commodity currencies soared on weakness in the US dollar and additional support from the PBOC.  or more than one week, the greenback has been gaining strength against its peers not forgetting the Australian dollar. The gain was as a result of expectations that Fed will embark on interest rate hike as soon as next month. The expectations were however cut short after Janet Yellen failed to give a conclusive statement. After this, the greenback is reported to be weakening. The next few days will be crucial for the greenback. Its weakening however makes it possible for its peers to go higher.

There is a point where the strength of a currency may be undesirable. These are the things that are hard to believe since strength is known to be desirable. This however is a little different in the world of currency. When the Australian dollar strength to its peers surpasses a specific level, it is no longer desirable. This is because it makes investments denominated by that currency expensive and therefore undesirable to foreign investors.

The RBA is keen to keep the interest rate below 2 per cent. The rising strength of the Australian dollar could however pose a big challenge to the central bank. The bank which is set to review its monetary policy next month on April may be forced to apply interest rate cut.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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