AUD/USD: A week of dull trade - Westpac

A week of dull trade in the mid-0.75s, US data, the FOMC meeting and Australia’s jobs report injected some life into AUD/USD, explains Sean Callow, Research Analyst at Westpac.

Key Quotes

“The FOMC inflicted passing damage, but the contrast between poor US CPI and retail sales and Australia’s 4 year low on the unemployment rate inspired a rally through 0.76 to highs since early April.”

“Fair value estimates are nearer 0.74, with iron ore prices struggling off the mat. Indeed our estimate of Australia’s commodity export price basket is probing lows since Sep 2016.”

“But the acceleration in Australia’s job creation to 2% y/y makes RBA rate cut talk even less plausible and places pressure on AUD spec shorts (leveraged funds on CME swung to net short in late May).”

“The commodity backdrop leaves us leaning towards selling AUD/USD rallies. But the near term range has probably risen to say 0.7550-0.7650, up about half a cent on the week.”