25 Aug 2015
AUD/USD could visit 0.70 in 6-month – Danske Bank
FXStreet (Edinburgh) - According to Kristoffer Lomholt, Analyst at Danske Bank, the Antipodean pair could deflate towards the 0.71 handle in the medium term.
Key Quotes
“The aussie has continued to suffer in the last month amid the renewed worries about Chinese growth prospects and tumbling commodity prices”.
“As a result, the AUD/USD has fallen closer to what fundamentally seems justified in the long term”.
“While this suggests less downside potential than previously, we maintain the view that short-term AUD risks remain skewed to the downside in the current environment even with no further RBA rate cuts”.
“Importantly, Australia is still suffering from a significant terms of trade shock. The Chinese decision to devalue the CNY is in our view an argument for further AUD weakness in the short term as it raises further question about the state of the Chinese economy”.
“We target AUD/USD at 0.73 in 1M (previously 0.74) and expect a Fed re-pricing to drive the cross down to 0.71 (0.72) in 3M. We still expect the cross to stabilise in 6-12M, when a Fed hiking cycle has been priced and the Australian economy recovers. We target the cross at 0.70 in 6M (0.71) and 12M (0.71)”.
Key Quotes
“The aussie has continued to suffer in the last month amid the renewed worries about Chinese growth prospects and tumbling commodity prices”.
“As a result, the AUD/USD has fallen closer to what fundamentally seems justified in the long term”.
“While this suggests less downside potential than previously, we maintain the view that short-term AUD risks remain skewed to the downside in the current environment even with no further RBA rate cuts”.
“Importantly, Australia is still suffering from a significant terms of trade shock. The Chinese decision to devalue the CNY is in our view an argument for further AUD weakness in the short term as it raises further question about the state of the Chinese economy”.
“We target AUD/USD at 0.73 in 1M (previously 0.74) and expect a Fed re-pricing to drive the cross down to 0.71 (0.72) in 3M. We still expect the cross to stabilise in 6-12M, when a Fed hiking cycle has been priced and the Australian economy recovers. We target the cross at 0.70 in 6M (0.71) and 12M (0.71)”.