With contract for difference being such a popular form of trading in Australia and as forex markets are the focus for many CFD investors, it is no surprise that the fortunes of the Australian Dollar are of great interest to many. Using various analysis tools is a key element of success for any type of currency trade and the fact that a bearish outlook is building for the Aussie currency, especially in terms of the AUD/USD pairing, means that further inspection is timely.
Lows
If lows for 2019 give way for the Australian Dollar, it is highly likely that far more significant lows will follow, and last week was another that dealt some body blows which saw the currency trading down to lows that had not been encountered since early January.
As with many forex market movements, official government data was undoubtedly involved in the slide as a very weak Gross Domestic Product release for the Australian economy hit home. On-quarter growth of only 0.2% for the final three months of last year saw the economic record give its worst performance for two years. The release came in lower than market expectations as well. The bad GDP figures come on the back of last month’s comprehensive re-evaluation of growth and inflation forecasts by the Reserve Bank of Australia, lending an overall air of gloom to proceedings.
Record low cash rate
Australia’s record low Official Cash Rate is already more than two years old, standing at 1.50%. The latest round of figures from official sources means that it is highly likely this situation is here to stay for quite some time. As futures markets now price in a further reduction expected by the end of 2019, it looks like it is almost certain to go lower.
With no Australian domestic economic data due to make an appearance this week, the forecast is highly unlikely to change in the short term. However, there will be business and consumer confidence related data coming to light as well as an insight into future expectations regarding inflation. Again, these are all factors that impact on forex trades and although none may indicate significant fluctuations for AUD/USD in the short term, CFD traders may well be taking into account the fact that the Australian Dollar seems to lack central government monetary policy support. How this will pan out over the coming months is open to speculation and of course will be further dependent on other major economic news coming from the US, China and even the post-Brexit UK.
Charts
While significant international factors will play their part and other major currencies find themselves in similar situations regarding central bank support, the Aussie dollar is vulnerable as the current spate of lows suggest further plummets that have not been experienced since 2009.
Technical forecasts rely on data, and historically there is some indication that a bearish approach is the only sensible option for AUD at the moment. With good news unlikely to make an appearance, the trends indicate that further lows are on the horizon, and whether a trade war settlement happens for the US and China, it might not even be big enough for Australia’s benefit.
Forex CFDs
Resources for CFD traders are plentiful and analytical tools come in a range of options that offer flexibility in terms of automation and ‘hands-on’ approaches. Different tools mean that analyzing information can be adapted to the way an individual trader is best suited to using them, and both functional and technical methodologies have their supporters and detractors.
For CFD traders taking positions in forex markets, established and tried and tested analysis methods allow the mathematical interpretation of data which gives clear results and indications. Although knowing how markets have behaved in the past in no guarantee to working out how they will perform in the future, it can be a way of gaining both insight and an edge in making decisions.
Technical analysis
As it is suited to shorter time frames that many forex traders take positions, technical analysis is a particularly popular tool for CFDs. In fact, an Investment Trends Australia CFD Report revealed that it is the most popular method used by forex, index, commodity and share CFD traders by far. In the report, it stated that 70% of CFD traders use technical analysis, with frequent traders more likely to use it to aid their decision-making process.
Although it can seem a complex and complicated system when first encountered, technical analysis is relatively easy to master and understand. The fact that it does involve a learning curve is a good example of how trading of any kind does need some ‘time investment’ as well as capital funding. Even though contract for difference takes the complexity out of trading on the markets, it does need a certain amount of dedication and attention to detail to become a successful investment enterprise.