Aussie Dollar Likely to Hit Parity With U.S. Dollar by End of Year

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February trading confirmed the strengthening potential of the Australian dollar against all currencies, and especially against the US Dollar. It opened the week trading around 0.9230. It’s up more than 3% since the beginning of the month.

Many investors are now more and more positive on the Australian dollar because it seems to have ‘decoupled’ from the greenback, in terms of the economic outlook and the monetary policy. For some investors, that means the Aussie is the perfect instrument of diversification in a portfolio with a global exposure: you get capital growth and a high yield. Indeed, the positive fundamentals for commodity prices and yield differential are the main drivers of the rising AUD.

Technically, the currency pair (AUD/USD) has been trading in a long-term bullish channel for a while. A lot of traders are betting on parity by the end of the year. In the short-term, any dips to the 0.9100 area would be seen as a good opportunity to enter a long position, as a move back to the highs of last November around 0.9400 is more than likely. On a longer time frame perspective, as long as the main support of this channel is still in place, the Australian dollar will get stronger.

Gabriel Andre
The Daily Reckoning Australia

Gabriel Andre
A former Futures and FX trader/portfolio manager, Gabriel Andre has worked in several hedge funds and asset management firms, both in Europe and Australia. He is a contributing editor to both Diggers & Drillers and the Australian Small Cap Investigator.
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