Are stocks and gold signaling an Australian dollar comeback?
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The Australian dollar has rebounded to 0.6600 against the US dollar (AUD/USD), after previously dipping near 0.6500 at the beginning of March amidst weak Australian GDP growth rates. This recovery marks a significant moment for traders observing the AUD, as it hints at potential resilience despite Australia’s economic challenges. The movement reflects broader market sentiment and could signal shifting trends in the forex landscape, particularly for currencies closely tied to commodity markets and global economic health.
Chinese stocks holding AUD back
Chinese large cap stocks (FXI) have struggled in 2024, still near historic lows as the Chinese economy has failed to rebound from the pandemic as other major countries have. The Australian dollar’s performance is intricately linked to the Chinese stock market, which is currently trading near historic lows. Due to the close economic relationship between China and Australia, particularly in trade and investment, movements in Chinese stocks can have a considerable impact on the AUD’s value. This connection underscores the importance of geopolitical and economic developments in Asia on forex trading strategies, especially for pairs like AUD/USD.
Australian dollar correlated to China, gold prices
Historically, the AUD/USD has shown a positive correlation with both the performance of Chinese stocks (FXI) and gold prices. This relationship illuminates the multi-faceted influences driving the Australian dollar’s valuation, highlighting the interplay between regional economic indicators and global commodity prices. Traders tracking the AUD/USD pair must therefore monitor these correlated assets closely, as they can provide valuable insights into potential directional movements.
What if Chinese stocks bounce back?
Should Chinese stocks recover, the current correlation dynamics suggest the Australian dollar could also see a rise, breaking away from the constraints that have limited its upside relative to gold’s performance. This scenario presents a keen interest for investors and traders speculating on the ripple effects of Chinese economic recovery on AUD/USD.
How high can AUD/USD price go?
Even with the recent bounce to 0.6600, AUD/USD is still relatively cheap compared to historical prices. In 2023, AUD got above 0.7000 against the US dollar. Looking back to 2021, the pair traded above 0.7800 on multiple occasions. This price action gives historic precedent for continued strength for the Australian dollar. Conversely, AUD/USD has also been lower – reaching 0.6300 last year.
AUD/USD historical prices
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This article was originally published by a www.ig.com . Read the Original article here. .