Courtesy of efxnews.com
Using different short- and medium-term macro and technical indicators ANZ discusses in a note to clients today how the AUD may behave over the rest of this year and how they should trade it accordingly.
Medium-term:
The medium-term, fundamental framework continues to point to downside risks, but the moves are likely to be a bit more limited than those seen of late, and still suggest that our USD 0.85 forecasts remain relevant despite having already reached our end of 2014 forecast
Near-term:
In the near-term, there is some risk of a small retracement. Figure 5 looks at the average significant residual from a series of 23 different single variant equations. What it shows is that outside of crisis periods the AUD can over or undershoot its short-term predicted values by about two cents – the level we are at now – before reverting
Technicals:
Technicals (and momentum indicators like stochastics and RSIs in particular) are also signalling caution in chasing the currency at the moment
All in all: This, according to ANZ, prompts a couple of conclusions.
“First, it says that the ability for the AUD to underperform on the crosses is becoming somewhat limited in absence of a further deterioration in either the domestic fundamentals or in the broader risk environment. Second, it suggests that the ability for the AUD to rally significantly against the USD is also limited, and that USD0.90 likely provides reasonable topside resistance,” ANZ concludes:
Strategy:
We continue to recommend a strategy of selling any strength in the AUD
AUDUSD currently 0.8772
