The Case for the Australian Dollar in 2020

Alan Penny

27 December 2019

3 min read

AUD coin on Australian flag

  • AUD bouncing back from historic lows, may soon reach 200 day EMA
  • Fibonacci retracement level simultaneously exceeds 61.8% 
  • If signed, US/China trade deal likely to benefit AUD

In 2020, it’s very likely that the Australian dollar will be one of the markets that a lot of people will be paying attention to. The Australian dollar is at historically cheap levels and as we close 2019, we are starting to see signs of strength again. That being said, there are a lot of different things that could influence the Aussie dollar, but 2020 is going to be very good for this currency.

Technical analysis

AUD/USD chart

The technical analysis for the AUD/USD pair is rather strong suddenly, as we have broken out to a fresh new high yet again. We have seen a series of “higher lows” over the last several weeks and have even broken above a major downtrend line. The 61.8% Fibonacci retracement level has also been broken at the same time, so this is now a very bullish situation. Ultimately, the market may continue to go much higher which will attract a lot of attention.

Ultimately, the market may continue to go much higher, which will attract a lot of attention.

The 200 day EMA being underneath now suggests that we are in an uptrend, and now it looks like a return to the 100% Fibonacci retracement level above at the 0.71 handle. Ultimately though, the 50 day EMA is getting ready to reach higher as well and may even form the so-called “golden cross.” This is when the 50 day EMA breaks above the 200 day EMA showing that there is more bullish pressure on the short-term than the long and that the momentum is shifting for the buyers to take over.

Headline noise and peripheral markets

Obviously, one of the biggest stories in 2020 will be the US/China trade situation. It is now very likely that the pair will move in sync with the attitude of that market. Ultimately, the Australian dollar will move up or down depending on how the attitude of the US/China situation continues.

Remember, China buys tons of hard materials from Australia in the form of copper, iron, and of course gold. Therefore, the idea of a trade deal being signed is good for the Aussie dollar as this currency is highly sensitive to the Chinese economy itself.

Ultimately, this is a market that is quite often influenced by Copper futures, which are in the process of breaking out as well. That being said, expect quite a bit of volatility in 2020, as we get headlines back and forth between the Americans and the Chinese, much in the same vein as 2019.


Pullbacks should offer plenty of value though, and value hunters will continue to jump into this market on those drops. That downtrend line should be supportive now, so at this point, by the time 2020 finishes, the Australian dollar should be much higher. This is not only due to the fact that we are starting the idea of signing a “Phase 1 deal” between the Americans and the Chinese, but as it is an election year, it’s very unlikely that there will be as much saber-rattling.

Written By
Alan Penny

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