Australian dollar set for decline? More analysts take the view that the AUD is overpriced at current levels

Details

Category: Australian Dollar News

Written by Sam Coventry

International Money Transfers at our sister site

"We suspect that yield momentum could also move against the AUD soon" - Westpac Global FX Strategy Group

The Australian dollar (Currency:AUD) is facing downward pressure pressures as more analysts take the view that the currency is over-stretched at current levels.

According to an analysis at Westpac the Australian dollar to US dollar exchange rate, "looks fully priced for good news and risks to downside are rising - prefer to sell strength into the 1.025/1.0350 region."

(Latest investment-grade FX forecast tables at our IMT site, access is Free via this Facebook entrance path).


Over at Bank of America Merrill Lynch Global Research, "Since March we have maintained our view that 0.98 represents a fundamentally “fair” value for AUDUSD. We leave our forecast for the rest of the year unchanged at this level." Full story here.

Over at Westpac the notion that the Australian dollar is now reaching its nadir is based on a a rather complex 'probability model.'

Westpac say:

"Our proprietary indicators are warning that the recent bounce in the A$ is drawing to an end.

"Probability model: Our 4 week probability model is just off its highest levels since late February 2012. As chart one shows AUD probability model readings in the 85-90% region typically herald that much of the good news is priced in.

"All of the key inputs in our model have pushed in the AUD’s favour over the last month. Commodity prices have risen, yield spreads have pushed in the currency’s favour and risk aversion has fallen.

"A turn around in our AUD probability index is likely to come from a combination renewed risk aversion and weaker commodity prices. However, we suspect that yield momentum could also move against the AUD soon given that our Australian data surprise index is at risk of rolling over going forward."