AUDUSD: Several factors conspiring to keep a lid on rallies - Westpac

Sean Callow, Research Analyst at Westpac, suggests that several factors are conspiring to keep a lid on AUD/USD rallies.

Key Quotes

“One is that almost all major sovereign bond markets are now offering 10 year yields well above the average of the past 3 months. AUD has been a key beneficiary of global QE-driven yield declines, but the end of this era could be in sight. Not only does this threaten AUD’s yield pickup, but it also rattles equity sentiment.

Another is the firmer underpinning for USD, as Dec Fed hike pricing grinds higher and positions are squeezed (notably USD/JPY). The 200dma at 0.7439 is within striking distance. But dips should be limited multi-day by fading pricing for RBA easing this year (<20%), Trump’s polling slide and resilient commodity prices as Chinese markets reopen. Coal is the eye-catching mover but Australia’s broad terms of trade is on the rise.”