Hard to recommend fresh longs from here on the Australian dollar warns analyst

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Category: Australian Dollar News

Written by Sam Coventry

International Money Transfers at our sister site

"Those hankering to place fresh AUD shorts will have their day but might be best to bide their time just a little longer" - Sean Callow at Westpac.

Analysts at Westpac Global Markets Strategy Group have said that their probability model is warning that plenty of good news is already priced into AUD/USD (such as yield spreads and risk proxies).

Commenting on the prospects facing the Australian dollar is Sean Callow at Westpac:


"For now we would not try to sell into AUD/USD given the risk the ECB surprises on the generous side and given our above-consensus 130K call on US NFP, which should help broad risk appetite.

"But it is hard to recommend fresh longs from here."

Turning to the Australian dollar vs New Zealand dollar exchange rate we see both currencies benefited from the risk rally after the EU meeting and demand for AUD has proven resilient, backed by the RBA stance and firm data.

"Those hankering to place fresh AUD shorts will have their day but might be best to bide their time just a little longer," says Callow.

On the fundamental front, Australia’s data calendar holds plenty of interest again though the June employment report (Thu) dominates
the week.

Total jobs are coming off a high base (+39K in May) so a negative headline should be taken calmly; the unemployment rate is probably the key number, likely to hold near May’s 5.1%.

Ahead of this we see Jun ANZ Job Ads (Mon), June NAB business survey (Tue), July Westpac consumer sentiment and May housing finance (Wed). RBA’s
Lowe speaks on Wed and Thu.

"AUD/USD should see good two way action through the ECB meeting, US payrolls and Aust jobs data. Those focusing on valuation metrics such as commodity prices and 2yr yield spreads (or expecting a sharp deterioration in EU sentiment) will view AUD/USD as vulnerable to correction from around 1.03," says Callow.