Currency Market Review: Australian Dollar on the Rise


  • The Australian dollar steadily gained against US dollar since the plunge in March when strict containment policies were introduced.
  • Safe-haven Japanese yen gained while global equity market fell last Thursday after Fed’s pessimistic outlook for the US economy.
  • If the situation worsens in the US, the demand for USD as a safer investment will still be high, driving USD value high.

Australian Dollar vs. US Dollar

The Australian dollar increased in value against USD. AUD/USD rose by 3.42% in 2 weeks from May 29 to June 13. Australia is reopening their economies faster than expected, and is much better at controlling the virus pandemic than US. Investors are more willing to hold AUD. Moreover, the investors are shifted to a ‘risk on’ and positive momentum market. The Australian economy was boosted by the government’s quantitative easing policy since March 19, 2020 and now investors are moving from safe haven assets to riskier ones such as stocks. Economists say the AUD rates tends to be pro-cyclical, which means it rallies when the global economy is recovering.

On the other hand, the USD is falling. Risk-on in Asia weakened the haven demand for the dollar. The number of Americans seeking unemployment benefits fell, but with millions laid off due to COVID-19 continue to receive the checks, investors believe that the U.S. labor market could take years to heal. However, last week, US dollar started to bounce back. The Fed left interest rate unchanged and signaled that the rate would stay through 2022. Also, the Fed predicted last Wednesday that US economy will shrink by 6.5% percent this year and the unemployment rate at year end 2020 will be 9.3%, which is more pessimistic than most market predictions. Investors were prompted to divest in riskier assets and invest more in bonds and US dollar, providing support to USD.

Thus, due to an appreciation of the Australian Dollar, a depreciation of the USD in the first week and an appreciation of USD in the second week, AUD/USD rose 3.42% over the period, in line with I Know First’s bullish forecast.

Australian Dollar vs. Japanese Yen

The Australian Dollar has appreciated against the JPY for the same reasons that it the Australian Dollar is on the rise against the USD.

Also, JPY weakened during the first week of the above period. Japan’s fiscal condition worsens further amid COVID-19 as the government is spending aggressively. The Finance Minister Taro Aso admitted that ‘Japan’s fiscal situation is extremely severe. ’ Even though the Bank of Japan’s purchases are preventing JGB market from collapsing, there is a persistent view that trust in JGBs could fall in the future. JPY weakens as people lose faith.

However, the safe haven Japanese yen gained last Thursday while a gauge of global equity markets fell the most in seven weeks after the Fed’s sobering outlook. The pessimistic prediction cast doubt on hopes for a V-shaped recovery. Thus, AUD/JPY dropped in the second week.

Overall, AUD/JPY increased by 3.29% over the 14-day period from May 19 to June 13. I Know First was accurate in predicting the positive future for the currency pair.

Euro vs. US Dollar

Political situation in the EU is calmer than before. And EU has been working together with its member states to contain the spread of the virus and support national healthcare systems to respond to the COVID-19 pandemic. Also, on May 27 the European Commission presented in Parliament a €750 billion economic stimulus plan that along with a revised proposal for the EU’s 2021-2027 budget should help mitigate the shock from the coronavirus pandemic and pave the way for a sustainable future. These acts were able to boost investors’ confidence and drove Euro higher.

USD changes the same way as previously mentioned. Thus, EUR/USD increased in the first week and was stable or slightly dropped in the second week. All in all, EUR/USD increased by 1.61% during the period. Thus, I Know First was correct in choosing the pair with a bullish future.

I Know First Currencies Forecast

This bullish currencies forecast was sent to the current I Know First subscribers on May 29, 2020.

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Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.

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