AUD/USD Weekly Fundamental Analysis, August 31 – September 4, 2015 Forecast

Weekly Analysis and Recommendation:

The turmoil created by the situation in China drove the AUD/USD to a new multi-year low last week. Even after the People’s Bank of China initiated new stimulus measures to calm the financial markets, the Aussie wasn’t able to muster much of a recovery from its lows. The PBOC helped calm nerves by cutting its one-year lending rate, reducing its reserve requirements and pumping Yuan into the financial system. 

Helping to pressure the Australian Dollar was talk of another rate cut by the Reserve Bank of Australia, which could come as early as November based on speculative bets. Traders will find out more about this issue when the RBA issues its latest interest statement on Tuesday, September 1. Investors will be looking for guidance from the RBA on its plans to stimulate the economy given the weak Chinese economy. 

The Aussie was also under pressure because of the strengthening U.S. economy. According to data released last week, U.S. GDP rose 3.7%. This raised the thought that the Fed could still raise interest rates in September although the majority of investors are betting against a rate hike due to the turbulence in the markets created by China. 

The direction of the AUD/USD could be decided early in the week with the release of Chinese manufacturing PMI data early Tuesday and the RBA decision a short-time after that. Chinese manufacturing PMI is expected to show a reading of 49.8. This will be lower than the last reading of 50.0 and signal a contraction in the economy. Caixin Final Manufacturing PMI is expected to show a reading of 47.2. 

The RBA is expected to leave its benchmark interest rate unchanged at 2.0%. 

On Friday, the U.S. will release its latest Non-Farm Payrolls data. The report is expected to show the economy added 220K new jobs in August and the unemployment rate is expected to decline to 5.2%. While a stronger-than-expected number may pressure the AUD/USD, it will not necessarily mean the Fed has enough evidence to raise rates later in the month. The recent volatility in the financial markets and the uncertainty created by China may mean the Fed will wait until later in the year or perhaps early 2016 before raising rates. 

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. 

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