AUD: Rally to extend further? – Westpac
In view of Sean Callow, Research Analyst at Westpac, without the threat of a rate cut or intervention, jawboning will do little to cap AUD/USD and it will rally further ahead.
Key Quotes
“The flurry of talk about an RBA tightening bias has mostly been doused by Debelle’s clarification on neutral rates, the Lowe speech and a muted CPI reading. Tuesday’s RBA statement should reaffirm a neutral outlook for the cash rate, arguing against AUD outperformance on crosses.”
“Commodity prices offer more support for AUD, with iron ore, copper and energy prices chopping higher. But on our estimates, the commodity rally has not kept up with AUD/USD, producing substantial overvaluation.”
“If the RBA has similar estimates, then they would be justified in using more forceful language in the statement. Indeed if they do not, then AUD is likely to rally further. But without the threat of a rate cut or intervention, jawboning will do little to cap AUD/USD if the US dollar remains heavy. Trade as high as 0.8150 is plausible but with specs already very long, we prefer neutral on the week.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
