Aus Dollar vs Pound & Dollar Forecast 2015: Aussie Faces Bleak Prospects on Exchange Rate Markets

The move comes as the broader Australian dollar exchange rate complex suffers fresh weakness with forecasts suggesting that 2015 does not bode well for those holding out for those hoping for a stronger Australian currency.

Nevertheless, sharp rebounds are possible as positioning becomes stretched, as is the case today:

• At the time of writing the pound to Australian dollar exchange rate (GBP/AUD) is trading 0.43 pct lower at 1.8461.
• The euro to Australian dollar (EUR/AUD) is 0.40 pct lower at 1.4475.
• The Australian dollar to US dollar rate (AUD/USD) is 0.49 pct higher at 0.8884.

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Why is the Aus dollar weaker today?

Hitting the Australian dollar lower at the start of the new week are comments from China’s Finance Minister at the G20 Meeting in Australia.

The minister suggests that recent policy easing may be limited despite China's recent economic deceleration.

"These remarks have seen Dollar Bloc losing ground against the greenback, while sterling and the EUR outperformed," notes Shaun Osborne at TD Securities.

Karen Jones at Commerzbank reckons further declines against the USD are possible:

"AUD/USD came under further downside pressure last week, and starts this week looking still vulnerable.

"We target the .8840/78.6% retracement of the move seen this year en route to .8660 this years low. We do have the March low just ahead of here at .8891.

"Current Position: Short .9080 Recommended Trade: lower the stop from .9040 to .9000. Exit .8660."

Forecasting a Lower Aussie Dollar in 2015

Roubini Economics senior director of research, David Nowakowski made a case for lower Aussie by stating that the firm expected Australian GDP to dip to 2% in 2015 thus allowing RBA to lower rates once again, "and trigger a second wave of selling that would take the pair down to the 7500 level," says Boris Schlossberg at BK Asset Management in a note to clients.

Nowakaowski's thesis rests on the assumption that commodity prices will continue to decline and certainly a sharp falloff in demand from China could prove his assumption to be true.

"However while Chinese growth has moderated it has shown no signs of contraction. In addition Australian economy has shown surprising resilience and ability to rebalance away from pure mining growth to more services oriented output," says Schlossberg.

Still Chinese data will be key and tonight's PMI Manufacturing report will be keenly watched by the market for any serious signs of a slowdown.

Looking at the technical forecast BK Asset Management point out that the AUD/USD is now fast approaching the key support level of 8850 which was the low earlier this year.

The pair could therefore soon be offered a degree of support at that level but sentiment against the pair remains extremely negative for now and it continues to be a "sell on rallies" trade both a a result of capital flows towards the greenback and the persistent worries over Chinese economic slowdown.

"However given the massive amount of selling that it has absorbed over the past month the AUD/USD is now primed for a short covering squeeze sooner rather than later," says Schlossberg.