FX Strategy: AUD Forecasts Revised Lower – June 2013

We have been flagging likely downward revisions to our AUD forecast for a couple of weeks now, following first the somewhat unexpected May RBA rate cut then the range-break higher in US Treasury yields

By

  • Price action since Monday’s AUD bounce convinces us to revise our AUD forecasts lower; support from down side US data surprises likely to prove ephemeral.
  • Higher FX volatility kills the carry attractions of AUD.
  • Short positioning and likelihood of support holding in the 0.94 area (at least temporarily) leads us to expect recent losses to be consolidated not extended.
  • Rising US (real) yield backdrop to drive ‘fair value’ lower and is key to our new lower forecast track.

For further analysis download the full report.