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Greg Gibbs, Founder, Analyst, & PM at  Amplifying Global FX Capital Pty Ltd, an Australian financial services company, explained that AUD faces a number of downside risks.

Key Quotes:

“These include a weakening housing market, a persistent jump in Australian bank funding costs, tightening credit conditions for Australian borrowers, tightening shadow-finance in China, a slowing Chinese economy, and threats related to a trade war between the US and China.”

“However, to date, China is managing its economy and financial sector to prevent more than a gradual slowing in activity. Chinese steel production growth remains solid and Australian commodity prices are holding above their average for the last two years.”

“Australia is taking a bigger share of Chinese iron ore imports, and its material sector is being supported by a combination of a weaker AUD and stable commodity prices. Australia’s external balance appears structurally stronger.”

“Private business investment is growing solidly, supported by infrastructure demand, as the mining investment downturn tapers out. Overall business conditions have ebbed in recent months but remain well above average.”

“Consumer confidence has lifted to moderately above average, showing little fallout, yet, from a weaker housing market. We expect the AUD/USD to be hemmed into a 70/75 range with a bias to expect further falls.”