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FX Commentary

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Sell AUD/USD spot

Tue, Sep 23 2008, 15:32 GMT
by Kasper Kirkegaard

Danske Bank A/S  |  View company's profile


AUD/USD heading south

  • •Relative to most of the anchors we consider when determining the near-term outlook for AUD/USD, we find that the AUD currently looks expensive. 

  • •The AUD has gained more than 7% against the USD after AUD/USD reached a low of 0.78 on 17 September, and is now trading above 0.84 on a rise in commodity prices.

  • •In our latest FX forecast update from 15 September we set our one-month AUD/USD forecast at 0.83, well above spot, looking for a short-term correction. We have now seen this correction, but given recent market developments, we believe that the recent rise in AUD/USD has been excessive. 

  • •Our short-term financial model, which uses the relative slope of the yield curve, stock markets, energy and a carry-to-risk measure as inputs, currently has a predicted value of 0.81. The current spot rate is close to 2 standard deviations away from the model estimate.

  • •Finally, we consider the global macro outlook as consistent with a continued decline in the AUD, particularly our expectations about a further slowing of the global economy, persistent high volatility and continued deleveraging.

  • •We recommend selling AUD/USD spot at 0.8417 with a target of 0.81 and a stop at 0.859.

Published on  Tue, Sep 23 2008, 15:36 GMT


Danske Bank | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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