CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

2020 AUD Outlook Stand Down Contrarians the RBA Has QE

Article By: ,  Head of Market Research
January 21, 2020 7:33 PM

2020 AUD Outlook: Stand Down Contrarians, the RBA Has QE

This article is a complement to our full 2020 Market Outlook report - please download the full report for more insight into our views for major markets this year, including bold predictions from the research team! Note that all analysis and data was current as of mid-December.

The trend is our friend (until it steals your money)

Shorting AUD/USD is not a new idea. And it’s a strategy that has worked well for bears in the years since the 2011 peak. Yet there’s an interesting cyclical component to the Aussie which should be considered before betting the house on further declines, at least over the near term.

Source: TradingView, GAIN Capital

Since January 2014 there have been three prominent, two-year cycles:

  • 2014-2016 (bearish)
  • 2016-2018 (bullish)
  • 2018-2020 (bearish)

A cycle low has occurred around late December / early January every year since 2016. If this pattern were to repeat, we could expect prices to embark upon a 2-year, frustratingly choppy rally starting at the beginning of 2020.

Fundamentally, the Aussie is not on a firm footing heading into 2020

However, simply being long AUD due to a cycle makes no sense if the incoming data and price action suggests momentum may not turn higher.

Despite a relatively optimistic meeting in November, where the Reserve Bank of Australia (RBA) stuck to its ‘gentle turning point’ mantra, GDP has since missed the mark and retail sales are stagnating at 0% YoY. Given the central bank has suggested that it could cut interest rates twice more if data isn’t on track to hit targets, these weak data points only bring forward the expectation of a cut. Still, if data can hold steady or even surprise to the upside, there’s a chance for AUD to be a very strong performer Q1.


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024