AUD/USD: Limited downside - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the AUD/USD pair is likely to remain supported as there is a limited room for more to be priced into the short end of the US yield curve and a steady up trend in Australia’s export commodity price basket.

Key Quotes

“These should limit downside on AUD/USD in the week ahead, though the pop higher in US long yields is worth monitoring (the AU-US 10yr spread is - 35bp, actually a little tighter on the week).”

“Commodities remain supportive, close to 3mth highs in basket terms including iron ore nudging $70/tonne, up almost 6% this month. Fair value is thus near 0.75.”

“US-China trade news has been a lot less helpful, but perhaps it is finally all priced in. Local political risk remains ahead of the 20 Oct by-election but overall, AUD/USD should test the 50dma around 0.7305. Not enough stars seem aligned to try the 100dma near 0.74 however.”