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AUD: A Buy On Dips; We Stay Long AUD/USD Targeting

The Australian dollar is relatively stable, with AUD/USD hugging the 0.76 handle. How long can this last?

Here is their view, courtesy of eFXnews:

Significant AUD downside has started to look more like a tail risk than a central forecast. Commodity prices have risen more than anticipated, liquidity remains ample and volatility is expected to remain in check.

Valuation has also corrected. There is now a negative risk premium priced into the AUD which suggests that even if a tail risk does manifest, the current level of the AUD provides some protection relative to other cyclical currencies.

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Putting this altogether, we continue to think that the current risk premium will be retained in the AUD, that fundamentals will be more stable, and that there is some further downside risk via a USD overshoot on policy.

As such we raise our forecasts, expecting the AUD to remain in its recent range for longer,  and shift our bias.  We recommend using weakness to buy rallies, rather than aggressively selling into strength.

ANZ maintains a long AUD/USD position from 0.7380 targeting 0.78, with a revised profit-stop at 0.7595.*

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.