24 Jan 2014
Flash: Scope for further AUD net shorts limited - TDS
FXstreet.com (Bali) - According to Annette Beacher, FX Strategist at TD Securities, despite concerns about a China, Australian underlying fundamentals remain reasonably sound, which leads Beacher to think current levels in AUD/USD should be respected near term.
Key Quotes
Why? In late 2013 underlying inflation jumped straight into the top half of the RBA’s 2-3% target band and with the aggressive AUD fall it is only a matter of time before tradable inflation starts to accelerate after two years of deflation."
"The next signpost is employment, and we expect a rebound after the weak December report as historical patterns suggest that a weak December is followed by a strong January, and the average of recent years is a robust +35k, an outcome that would keep the floor under the AUD at USD0.87/88."
"The bottom line is we see the scope for further net shorts being limited as it becomes consensus that the next RBA move is up for the cash rate, even if well down the track."
"Our year-end target of $US0.87 implies that RBA tightening is buried within the flows into the USD as yields continue to rise there."
Key Quotes
Why? In late 2013 underlying inflation jumped straight into the top half of the RBA’s 2-3% target band and with the aggressive AUD fall it is only a matter of time before tradable inflation starts to accelerate after two years of deflation."
"The next signpost is employment, and we expect a rebound after the weak December report as historical patterns suggest that a weak December is followed by a strong January, and the average of recent years is a robust +35k, an outcome that would keep the floor under the AUD at USD0.87/88."
"The bottom line is we see the scope for further net shorts being limited as it becomes consensus that the next RBA move is up for the cash rate, even if well down the track."
"Our year-end target of $US0.87 implies that RBA tightening is buried within the flows into the USD as yields continue to rise there."