AUD/USD: Extending rally to 0.7600 and beyond is likely to prove difficult - Westpac

Sean Callow, Research Analyst at Westpac, explains that their gloomier forecasts for Australia Q1 GDP proved correct, allowing AUD/USD to enjoy some short-covering demand, reaching 8 week highs, but extending the rally to 0.7600 and beyond is likely to prove difficult.

Key Quotes

“We will need some much better data soon for the RBA’s 3+% growth forecasts to be met. May job creation would have to be very strong for markets to stop leaning towards (albeit only slightly) another rate cut.”

“Iron ore prices are also proving softer than we had been expecting, cutting Australia’s commodity export price basket (WCFIAECI on Bloomberg) to lows since Sep16 and near -14% since end-April.”

“Moreover, with DXY likely to steady near term, AUD/USD should falter in the 0.7550/75 area, fading back below 0.75.”