AUD: 0.73 should continue to hold - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the broad USD tone seems likely to keep a lid on AUD/USD on any probes above 0.75 near term (note moving averages in 0.7526-80 range) but 0.73 should continue to hold.

Key Quotes

“Commodity price volatility is very high, with e.g. last week’s steep gains in iron ore prices quickly followed by sharp losses. But unless there is a sustained decline in Australia’s key commodity prices, AUD/USD fair value is likely to remain in the high 0.70s, meaning the Aussie is prima facie undervalued. Of course if your FV model has a high weight for volatility, then 0.74 might be “fair” after all.”

“The domestic narrative is likely to be mixed in the week ahead. There is no tension over the RBA decision, which helps. But GDP is shaping up as a very small rise at best, a disappointing outcome in the wake of poor jobs data.”