AUD/USD Monthly Fundamental Forecast – December 2015

The AUD/USD recovered a few points over the last few trading days of the month, weighed down by a month of lackluster Chinese data and the growing US dollar. The pair closed the month at 0.7240 ahead of the RBA decision on the 1^st. The RBA is expected to hold rates and policy. Commodity currencies including the Australian and New Zealand dollars posted the biggest gains against the dollar, with the kiwi rising as much as 0.8 percent against the greenback during intraday trading. The Aussie might have benefited from a bounce in the price of gold, said Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York.

AUD appears vulnerable as we enter the holiday season, with risk of a fundamentally-driven decline to fresh lows on the back of central bank policy divergence and the potential for a further narrowing in yield differentials. Technically, the failure at 100 day MA resistance underscores a bearish trend. Analysts hold a year-end target of 0.70; however we acknowledge the potential for greater downside risk to the forecast.

Monetary conditions are set to remain accommodative over the coming quarters with the benchmark interest rate set at the record low level of 2.00%. The Reserve Bank of Australia (RBA) lowered the policy rate by 25 basis points in May and has kept it on hold following subsequent monetary policy meetings, most recently on October 4th. The accompanying minutes highlight that downside risks to the growth outlook have increased with policymakers raising concerns around China’s economic growth deceleration and weaker momentum in East Asia more generally.

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.

Major Economic Events That Will Affect The Markets In December