When it comes to forecasting moves in exchange rates, like for the Australian dollar, just getting the direction right is often a win. When trying to predict the extent of shorter-term movements, say over the next month or two, the level of difficulty can be even more challenging.

One of the clues – or at least longer-term guiding principles – is to focus on the heritage of the particular currency you’re looking at. Regarding the US dollar, this is at the more stable or defensive end of the spectrum, given the US is still the world’s largest (and militarily strongest) economy in the world and its currency remains the world’s “reserve” currency. When the world wobbles, capital flows into US assets, pushing the US dollar higher.