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Sean Callow, Research Analyst at Westpac, points out that speculators in futures markets appear to be already fairly well positioned for AUD weakness.

Key Quotes

“The Aussie seems to have been weighed by a risk premium stemming from US-China trade tensions for much of this year.”

“The fundamentals are quite a bit more upbeat, with Australian economic growth likely to remain well above 3%yr in Q4 2018 and commodity prices at multi-month highs, a notable contrast with the notion of an economic hit to China from protectionist trade measures.”

“Yet there is nothing bullish for AUD in the Shanghai Composite slumping to lows since 2014 or the rise in global risk aversion. Moreover, Australia’s government will lose its majority if it does not retain win the 20 October by-election. Hence while our neutral DXY view for the week ahead argues for AUD/USD to struggle sideways, it would be no surprise to see some trade with a 0.69 handle near term.”