29 Jul 2013
Flash: AUD/USD could test resistance at 0.9350 on US stimuli – Westpac
FXstreet.com (New York) - Global FX Strategist Sean Callow at Westpac, analyzes the short-term profile of the AUD/USD and Australian rates.
Key quotes
“Pricing for the RBA next week shouldn’t move far from 70-75%, leaving the AUD driven mostly by US news flow and China PMI. US GDP and FOMC should help AUD/USD test tough resistance around 0.9350, assuming low expectations for China PMI are not undershot markedly.”
Regarding the AU outright, “there are a number of key risk events this week, which will be crucial to near term yield performance. However, on balance, we are expecting front-end yields to remain well bid ahead of a likely RBA cut on August 6. Long-end yields will continue to be impacted by UST price action, and we have switched to selling into UST rallies, rather than buying dips.”
In terms of the AU curve, “at current levels we would not be adding to steepening positions, but should we see a pullback towards double digits, we would recommend easing into a steepener position. Target initially 120bp, but there is room for it to move higher, with the curve potentially stabilizing at historically steep levels.”
Key quotes
“Pricing for the RBA next week shouldn’t move far from 70-75%, leaving the AUD driven mostly by US news flow and China PMI. US GDP and FOMC should help AUD/USD test tough resistance around 0.9350, assuming low expectations for China PMI are not undershot markedly.”
Regarding the AU outright, “there are a number of key risk events this week, which will be crucial to near term yield performance. However, on balance, we are expecting front-end yields to remain well bid ahead of a likely RBA cut on August 6. Long-end yields will continue to be impacted by UST price action, and we have switched to selling into UST rallies, rather than buying dips.”
In terms of the AU curve, “at current levels we would not be adding to steepening positions, but should we see a pullback towards double digits, we would recommend easing into a steepener position. Target initially 120bp, but there is room for it to move higher, with the curve potentially stabilizing at historically steep levels.”