CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Why the ASX 200 crashed 3% on Friday and AMP’s AUD/USD outlook

We examine why the local benchmark plunged during Friday’s session as well as briefly examine AMP’s outlook for the Australian dollar over the next six to twelve months.

ASX 200 follows Wall Street lower on Friday

The ASX 200 benchmark collapsed on Friday – finishing out the session 3.06% or 187 points lower – following a brutal session in US markets overnight.

In a pullback that many have argued is well overdue, US markets plunged steeply during Thursday’s session – with tech stocks leading the losses. The Dow Jones Industrial Average fell 2.78% to 28,292 points; the S&P 500 benchmark dropped 3.51% to 3,455 points; while the tech-heavy Nasdaq 100 crashed a staggering 5.23% – to finish out the session at 11,771 points.

Speaking of these market moves, IG Market Analyst, Kyle Rodda said:

‘The US stock market, and especially US tech-shares, were due a corrective move. It’s a dynamic that could persist in the market for several days, if not a little longer now, before the market returns to its primary uptrend.’

Unsurprisingly, as noted at the start, the ASX 200 followed Wall Street lower on Friday – with the benchmark finishing out the week firmly below the 6,000 point level – at 5,925 points (-3.06%).

‘The ASX200 has been hammered today, just as expected. Wall Street’s pullback had us set for relatively substantial losses today, and the market has run further to the downside than what had been implied in futures markets this morning,’ Mr Rodda explained after the market close.

Indeed, looking to fully replicate the US experience, the majority of the worst performing local equities were tech stocks, with WiseTech, Afterpay and Appen some of the biggest losers from the session.

Despite today’s share price weakness – with a longer-term view in mind – analysts from AMP Capital recently argued that the Australian share market will 'probably not' continue to lag its global peers, pointing out that:

'As the global economy recovers and interest rates bottom this will likely benefit cyclical sectors and financials and hence see non-US, including Australian shares, outperform. More money printing probably also helped in the US, but this will eventually slow.’

Australian dollar (AUD/USD) outlook: the bull case

Moving away from equity markets, with a view that commodity prices will continue to rise amidst a weaker USD, analysts from AMP Capital this week said they expected the Australian dollar to trend higher in the short term.

‘We expect the trend to remain up in the $A towards $US0.80 on a 6-12 month view helped by rising commodities and a return to a positive interest rate differential versus the US,’ analysts from AMP mused.

The Australian dollar has indeed risen strongly in the last couple of months – boosted by iron ore prices trading around multi-year highs – gaining from below $0.70 at the start of July, to last trade at around $0.72.

At its 52-week low the AUD/USD traded below $0.60.

AMP’s view mirrors that of Macquarie Wealth Management, with the investment bank in early August postulating that ‘In a scenario where the CRBRI [CRB Raw Industrials Index] rises 20% off the low (which is a modest upcycle), the implied AUD/USD is $0.80.’

Mind you, while the Aussie dollar has risen solidly over the last few months, it has pulled back modestly in the last few days amidst elevated levels of volatility – retreating from an intraday high of $0.74135, recorded on 1 September.

How to trade markets – long or short

You can use CFDs to trade both rising and falling markets, including currencies, equities and indices, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) the Australian dollar using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘AUD/USD' in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.