26 Jul 2013
Flash: AUD/USD headwinds to intensify, look for fresh cycle lows - TDS
FXstreet.com (Barcelona) - The AUD/USD may test fresh cycle lows in coming weeks, according to Alvin Pontoh, FX Strategist at TD Securities, with his view inclined towards the bearish side on three big macro drivers pulling in the same direction.
Key Quotes
"Concerns over Chinese economic growth are likely to intensify after Wednesday’s poor HSBC manufacturing PMI (47.7 compared with prior 48.2). Those concerns may be exacerbated by the fact that the Sept qtr is a weak one for iron ore prices, the single largest commodity in Australia’s export basket."
"Secondly, we expect Stevens and the RBA Board to keep talking down the AUD, where we believe an ‘8-handle’ against the greenback is desired. Despite the inflation report, there remains a high risk that our November rate cut is delivered in August."
"Finally, we still expect the US Fed to announce tapering in September. This outcome is not yet fully priced, with only half of economists surveyed expecting it at this point, and we suspect the FOMC will avoid signaling it at its next July statement. As such, expect a resurgent USD—and weak AUD—when the Fed finally does confirm that tapering is occurring."
Key Quotes
"Concerns over Chinese economic growth are likely to intensify after Wednesday’s poor HSBC manufacturing PMI (47.7 compared with prior 48.2). Those concerns may be exacerbated by the fact that the Sept qtr is a weak one for iron ore prices, the single largest commodity in Australia’s export basket."
"Secondly, we expect Stevens and the RBA Board to keep talking down the AUD, where we believe an ‘8-handle’ against the greenback is desired. Despite the inflation report, there remains a high risk that our November rate cut is delivered in August."
"Finally, we still expect the US Fed to announce tapering in September. This outcome is not yet fully priced, with only half of economists surveyed expecting it at this point, and we suspect the FOMC will avoid signaling it at its next July statement. As such, expect a resurgent USD—and weak AUD—when the Fed finally does confirm that tapering is occurring."