The Australian dollar managed to break above resistance but certainly seems limited. What’s next?
The team at BTMU point to the downside:
Here is their view, courtesy of eFXnews:
The Australian dollar has advanced further with the focus firmly on signs of a shift from the RBA away from further monetary easing, notes Bank of Tokyo-Mitsubishi (BTMU).
“However, we remain unconvinced that the Australian dollar can continue to advance in the face of further falls in iron ore prices and general uncertainty over the outlook for growth in China. Iron ore prices have fallen by over 20% since the start of October with the currency moving the other way.
Does this reflect the terms of trade deterioration being fully in the price? Perhaps, although we suspect that the optimism over domestic demand conditions may be excessive following the strong jobs report. The bias of the RBA is still to ease and the divergence with the US will persist for a while yet,” BTMU argues.
“We maintain a bias for a lower AUD/USD, albeit to levels higher than we assumed before,” BTMiU projects.
BTMU targets AUD/USD at 0.70 by year-end, and at 0.68 by Q1’16-end.
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