AUD Continues to Climb as Commodity Prices Strengthen
As the year progresses, so too does the AUD rollercoaster. The ups and downs- both social and economically- of 2022, so far, have rocked many parts of the world. Australia’s currency seemed to be sinking beneath the waves, but things are beginning to turn around.
What we want to know is how likely the positive outlook is to last. What factors are going to play key roles in the FOREX movement for the AUD?
The AUD’s Upward Spiral
In the last week, the Australian Dollar has gone from strength to strength on the FOREX market. Last Friday saw a sudden overnight jump over the 0.74 mark- something it had failed to do bar once since the November spending rush.
The gradual steady climb of the currency coincided with the eventual loosening of lockdowns that has restricted and riled the population for the best part of the last two years. Early breakouts in 2022 hindered any glimpse of progress, driving the AUD below 70 US cents by the end of January.
Fast forward two months and the Australian Dollar is sitting strong on the FOREX market, trading over 0.75 for the last several days. It is now riding extremely close to the six-month day closing high of 0.732- coming in at 0.716 on March 25th.
Why the Rise in Commodities?
By now, anyone following international currency and commodity trends is probably fed up hearing about oil. The continuing war between Russia and Ukraine has relentlessly disrupted supply and demand around the world.
That disruption was only heightened this week by damage caused to a major Russian oil pipeline in the Black Sea. It is likely to see around one trillion barrels of oil disappear from the market until it can be repaired- something that could take time given the ongoing conflict.
Because of this, Brent and WTI crude oil prices surged, along with nickel, copper, and aluminium. Although these movements were concerning for the US Dollar, the commodity-linked AUD strengthened significantly.
Gold also held strong- another green tick for the Aussie Dollar over the USD. As a rule, gold underpins the Australian FOREX market and is a good indicator of how things are looking.
In a nutshell, the reason for the drive in commodities is a combination of rising demand in the wake of the global pandemic and the hindered supplies due to international politics. It is a definite concern for the people in need of these commodities, but FOREX investors may be benefiting.
Can This Climbing Trend Continue?
As it stands, there is a strong belief that the AUD is in an excellent position moving toward April. The senseless war in Eastern Europe shows no sign of a peaceful end, meaning commodities are likely to stay at a premium for some time to come.
Keep in mind that the AUD and its performance on the FOREX markets are still in a volatile position, despite its current outlook. A currency rising based on extreme factors pushing commodities higher (the core reason for the AUD success) is not a currency with long-term stability.
Although it looks likely that we could see the Australian Dollar break the October high if the trend continues, investors should still be cautious. If things change in Russia and the oil crisis subsides, the AUD could feel some severe backlash. A drop in gold, oil, and other natural elements could signify a swift end to this upward progression.
Final Thoughts
The AUD looks good for now. If the market continues as expected over the next week, it is likely to mean the third week in a row for a climbing value. Predictions seem clear that a six-month high is to come in the not-so-distant future, so investors should be poised and ready.
However, this is not necessarily a sustainable trend. Exercise cautious confidence moving forward: everything is closely tied to commodities. That is not exactly news in the Australian FOREX market since the currency has always been overwhelmingly commodity-based, but that is more strongly felt now than ever before.