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The commodity story remains super supportive for the aussie but trade tensions with China are deepening and could deteriorate further. Economists at Westpac recommend waiting for dips to 0.7325/50 to buy. 

Key quotes

“The commodity story remains super supportive for the aussie, with the 62% iron ore index at seven and a half year highs of $150 for the first time since 2008. Over the last 4 weeks, the Westpac export commodity price index has risen by 14%, our A$ fair value model output has risen by just over 5% and the A$ by just 2.8%. So its clear that the commodity price story points to further upside.”

“Australia China trade relations remain strained. After last month’s decision by China’s MOFCOM to tariff Australian wine at 107.1% to 212.1%, countervailing deposits were increased by 6.3% to 6.4% today. And with Australia having passed the Foreign Relations (State & Territory Arrangements) Bill, applying that legislation to wind back e.g. NT lease of Port Darwin to Landbridge Group would drive more retaliation next year.”

“We stick with a buy dip view, with dips to 0.7325/50 our preferred target.”