AUD/USD set a new post-GFC low of 0.6312 this week but it seemed to have little to do with fundamental news. Analysts at Westpac Institutional Bank think the Aussie rallies are capped and, therefore, look for selling into any squeezes.
“The US dollar is likely to remain on the back foot next week into the FOMC meeting. This limits the downside on AUD/USD but unfortunately, there is surely much worse to come for the global economy, capping any AUD rallies.”
“The federal government’s fiscal package is bolder than seemed likely just days ago, with the cash payments likely to be key to stemming the contraction in Q2 GDP. But a ‘technical’ recession is still likely and QE talk is picking up – including by the RBA itself.”
“Given the likely pressure on US$ into the FOMC meeting, we retain a neutral AUD/USD stance on the week, but would sell into any squeezes towards 0.6550/75 as Covid-19 cases ex-China continue to spread.”