AUD: Limited downside - Westpac

Sean Callow, Research Analyst at Westpac, explains that AUD/USD is only -0.8% on the week despite the steep mid-week slide and risk appetite, notably steady inflows to the equity markets of some of Australia’s key Asian trading partners, argues against much further downside on AUD.

Key Quotes

“So does the RBA’s upbeat tone, which ensures rate cut pricing gets no real traction.”

“Still, recent price action is consistent with an unwind of stubborn leveraged fund net longs on CME. This probably needs to run its course, which might mean a test of 0.73 against a firm USD.”

“A wildcard is the ratings agency response to the budget. AUD could well fall more sharply than govt bonds if Australia loses its AAA rating, while affirmation of the rating should see AUD squeeze higher.”