Dukascopy Bank Team
Dukascopy Bank SA
Jonathan Cavenagh, Currency Strategist, on Aussie
What will be the main drivers for the Aussie throughout the year of 2014?
First and fore most that is going to be very important is the U.S. Dollar trend. The greenback has been looking very strong at some periods of 2014, but currently it looks a little bit weaker. Thus, in the beginning of the year the market was looking for quite an aggressive rise of the Dollar this year. That was going to support the view that the AUD/USD exchange rate should come under more downside pressure. From that perspective, I believe that people have been left disappointed by the lack of traction in terms of the broader greenback trend. That is certainly filled through into a stronger AUD/USD than what a lot of us were expecting compared to the beginning of this year.
The broader greenback trend is naturally a key influence on how the AUD/USD unfolds, therefore, I believe that is the first point when we can forecast where the exchange rate is going to go. Secondly, we have already touched on in terms of the outlook for the RBA, and that has more dovishness built into it. However, the other peace of the puzzle is what happens with commodity process suggesting a weaker AUD/USD trade.
What are your forecasts for the AUD/USD and the EUR/AUD for the end of Q3 and the end of this year?
In the Q3 we expect the AUD/USD to trade at 0.91. Talking about the end of 2014, the balance of risk where we stay at the current moment, suggest that currency should drop. Therefore, our forecasts of the AUD/USD at 0.90 by the end of 2014 unfold. This risk that trend goes down is due to a weaker commodity price environment backdrop, as well as the dovish RBA outlook and a generally improving outlook from the greenback. I believe that this is a case of getting towards the top end of the range from this currency pair perspective. I would be surprised if we saw further strength through the 0.95 level.
Talking about the EUR/AUD currency pair, we generally got it higher from where we are at present, hence, we anticipate 1.4945 for the Q3. That is based on the view that we are going to see a greater weakness in the Australian Dollar relative to the Euro. By the end of the year, we have got the pair drifting down to 1.48.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
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