24 Mar 2014
Looking at current levels to start selling AUD/USD - RBS
FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, shares his thoughts on the AUD, noting that risk is to the downside.
Key Quotes
"The AUD's performance over recent weeks has been surprisingly strong. It has tended to ignore indicators of slowdown in China and lower commodity prices. It has generally held up better than several Asian currencies that have been undermined by recent CNY weakness, it has outperformed the EUR and GBP that have stalled, significantly out-performed the CAD that fell sharply last week to new lows and recovered somewhat against the NZD despite strong NZD data and steady milk prices."
"The recovery may reflect a degree of recovery from quite negative sentiment late last year and a steady shift in perception towards the domestic economy. Several Australian banks dropped their rate cut forecasts last week following better than expected labour data two weeks ago and statements from the RBA that suggest there is a much higher hurdle for a further cut in rates and it expects a long period of stable rates."
"The AUD benefited late last week from statements from the Chinese government suggesting they will enact stimulus measures to support growth. These are discussed by my colleague Gao Qi in his report today."
"There is little data in Australia this week, and this may work in its favour, as some recent (lesser watched) Australian indicators suggest recovery momentum may wane."
"The slowdown in China appears real, crucially spreading to the property market, and iron ore inventory at ports in China are around record highs. This should keep miners confidence in check, notwithstanding the bravado of several mining execs over the last few weeks dismissing the recent fall in iron ore prices as a short term phenomenon."
"With the US economy steadily healing and rate rises moving into view, albeit still probably another 12 months away, we see AUD topside limited. The market is likely to be now more reactive to US data as discussed in our week ahead view from my colleague in New York, Brian Dangerfield."
"The AUD chart at this time looks relatively neutral. It has been grinding out a choppy rebound since lows in January. We would be looking at current levels to start selling again expecting it to struggle around recent highs in the .91s. "
Key Quotes
"The AUD's performance over recent weeks has been surprisingly strong. It has tended to ignore indicators of slowdown in China and lower commodity prices. It has generally held up better than several Asian currencies that have been undermined by recent CNY weakness, it has outperformed the EUR and GBP that have stalled, significantly out-performed the CAD that fell sharply last week to new lows and recovered somewhat against the NZD despite strong NZD data and steady milk prices."
"The recovery may reflect a degree of recovery from quite negative sentiment late last year and a steady shift in perception towards the domestic economy. Several Australian banks dropped their rate cut forecasts last week following better than expected labour data two weeks ago and statements from the RBA that suggest there is a much higher hurdle for a further cut in rates and it expects a long period of stable rates."
"The AUD benefited late last week from statements from the Chinese government suggesting they will enact stimulus measures to support growth. These are discussed by my colleague Gao Qi in his report today."
"There is little data in Australia this week, and this may work in its favour, as some recent (lesser watched) Australian indicators suggest recovery momentum may wane."
"The slowdown in China appears real, crucially spreading to the property market, and iron ore inventory at ports in China are around record highs. This should keep miners confidence in check, notwithstanding the bravado of several mining execs over the last few weeks dismissing the recent fall in iron ore prices as a short term phenomenon."
"With the US economy steadily healing and rate rises moving into view, albeit still probably another 12 months away, we see AUD topside limited. The market is likely to be now more reactive to US data as discussed in our week ahead view from my colleague in New York, Brian Dangerfield."
"The AUD chart at this time looks relatively neutral. It has been grinding out a choppy rebound since lows in January. We would be looking at current levels to start selling again expecting it to struggle around recent highs in the .91s. "