Australian Dollar Poised For Gains

Australian Dollar Poised For Gains

For most of last year, the Australian Dollar mat selling pressure against many of the world’s most commonly traded currencies.  Of course, there were exceptions to this as currencies like the Euro are still caught up in debt issues that are unmatched in the developed world.  But the environment of lower interest rates had created bearish trends in the higher-yielding currencies, as well.

Since both the Australian and New Zealand Dollars fall into this category it is important for investors to take note as there are some key implications that come with a higher or lower currency value.

Trends Are Bottoming

Over the last year, we can see that trends in the Australian Dollar (AUD) have started to bottom.  This can be confirmed by price activity in the AUD/USD, which is the most commonly traded currency pair in the Australian Dollar.  According to forex broker FiboGroup, prices here have fallen to nearly 0.70, and these are levels that have not been seen for quite some time.

But since we have traded in this area for months, it is unlikely that we will see prices declines much further.  This means that the Australian Dollar would be poised to rally in 2016.  For consumers, this means that it will become cheaper to buy foreign export items in countries that have not seen similar currency appreciated over the same period.

Consumers and Investors

For investors and those planning for retirement, this also means that assets denominated in Australian Dollars will increase in value.  This includes stocks and commodities that are physically held in the country.  So there will likely to some new investing opportunities available this year that were not available last year.  There is still the potential that some of these trends would change and head lower.  One event that could cause this would be a change in the interest rates held at the Reserve Bank of Australia.  Lower interest rates are generally not positive for a currency so if we were to see changes, it could be a negative for those trading in the AUD.

These are all factors that should be of interest to both consumers and investors in the coming year.  There were some very clear price trends in 2015 but there is still the possibility that we would see these start to reverse and lead to higher valuations in the AUD.