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7 Feb 2013
Forex Flash: AUD/USD short-term bias negative, even for Aussie bulls ANZ bank
The prevailing mix of cross-currents in FX markets are a short-term negative for the AUD/USD, says Andrew Salter, FX Strategist at ANZ. There are three main themes playing against an Aussie appreciation, he notes:
1- The path of least resistance to Australian dollar appreciation is via AUD/JPY, not AUD/USD.
2- There is a structural unwind of precautionary short euro positions. This is a flow-driven move. It is more quantifiable than the yen move. Since the Aussie was a beneficiary of these precautionary inflows, the rate should struggle as they are unwound.
3- Weakness in core sovereign bond markets, reflect expectations of improving global growth. This is exerting its influence on exchange rates via the yield differential. Higher yielding currencies such as the Aussie have become marginally less appealing
Mr. Salter, however, still sees value at current AUD/USD levels for a longer term bet.
The analyst notes: "Taking a somewhat longer perspective the fundamentals are sound. Current level represent a clear buying opportunity. Formidable support from foreign direct investments suggests any fall in the AUD/USD will be easily absorbed. We have been long AUD/USD from November last year with an entry point of 1.0300, targeting 1.0700. We add a stop loss at 1.0240."
1- The path of least resistance to Australian dollar appreciation is via AUD/JPY, not AUD/USD.
2- There is a structural unwind of precautionary short euro positions. This is a flow-driven move. It is more quantifiable than the yen move. Since the Aussie was a beneficiary of these precautionary inflows, the rate should struggle as they are unwound.
3- Weakness in core sovereign bond markets, reflect expectations of improving global growth. This is exerting its influence on exchange rates via the yield differential. Higher yielding currencies such as the Aussie have become marginally less appealing
Mr. Salter, however, still sees value at current AUD/USD levels for a longer term bet.
The analyst notes: "Taking a somewhat longer perspective the fundamentals are sound. Current level represent a clear buying opportunity. Formidable support from foreign direct investments suggests any fall in the AUD/USD will be easily absorbed. We have been long AUD/USD from November last year with an entry point of 1.0300, targeting 1.0700. We add a stop loss at 1.0240."