27 Mar 2014
AUD/USD: Topside target circa 0.95 - RBS
FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, notes that targets for the AUD/USD for the topside may be circa 0.95.
Key Quotes
"The current rebound in the AUD has powerfully pushed through key technical levels to suggest a significant bottom in place, breaking above a head and shoulders neck line and 200-day moving average that intersected. Targets for the topside may be .95."
"In light of what appears to be a significant oversold position, a stable outlook for rates in Australia, more confident RBA, a lack of genuine financial stress in China, hope of further stimulus in China, it is quite possible that the AUD does reach .95."
"However, we expect this period of strength in the AUD to undermine confidence in Australia, eventually trigger a shift in rhetoric by the RBA back towards clearer jawboning for a lower AUD. We see upside risks for US rates and/or potential for financial stress in China to re-emerge. We see some potential for house price momentum and investor demand to fade at a time when mining employment will also decline faster. We see potential for further declines in iron ore and coal prices as the Chinese economy continues to slow against rising commodity supply."
"As such, our bias is to wait out the current upswing in the AUD and look for a time when its oversold condition moves into remission. Perhaps this will be in the .93 to .95 range."
Key Quotes
"The current rebound in the AUD has powerfully pushed through key technical levels to suggest a significant bottom in place, breaking above a head and shoulders neck line and 200-day moving average that intersected. Targets for the topside may be .95."
"In light of what appears to be a significant oversold position, a stable outlook for rates in Australia, more confident RBA, a lack of genuine financial stress in China, hope of further stimulus in China, it is quite possible that the AUD does reach .95."
"However, we expect this period of strength in the AUD to undermine confidence in Australia, eventually trigger a shift in rhetoric by the RBA back towards clearer jawboning for a lower AUD. We see upside risks for US rates and/or potential for financial stress in China to re-emerge. We see some potential for house price momentum and investor demand to fade at a time when mining employment will also decline faster. We see potential for further declines in iron ore and coal prices as the Chinese economy continues to slow against rising commodity supply."
"As such, our bias is to wait out the current upswing in the AUD and look for a time when its oversold condition moves into remission. Perhaps this will be in the .93 to .95 range."