Outlook for AUD/USD and crosses – ANZ

FXStreet (Barcelona) – Daniel Been, Senior FX Strategist at ANZ, offers the outlook for AUD/USD and crosses, noting that USD is set to assert dominance against the commodity currencies.

Key Quotes

“We remain confident that the USD will ultimately reassert its dominance, particularly against commodity and emerging market currencies.”

“In addition, with markets having already shifted their expectations towards a slow and steady path for Fed rate hikes, it seems like there is a limit to the upside that can continue to manifest in the AUD.”

“On the flipside, the potential for both volatility and for growth surprises in the US are tangible and should ultimately lead to a weaker AUD.”

“The AUD/NZD has rebounded sharply from its lows and is now somewhat better aligned with relative fundamentals. With the easing cycle in New Zealand now under way, and with risks there continuing to point to a larger than expected easing cycle, the medium term direction for the AUD/NZD is still likely higher. However, from here we need to see either further proof of deterioration in New Zealand, or of acceleration in Australia.”

“The AUD/EUR will likely drift higher through the month. With the economic pulse in Europe slowing a touch once again, and Greek negotiations a moving feast, the EUR will likely underperform on most crosses. Meanwhile, the AUD/GBP could go the other way. The UK remains on an upward trajectory, and the Bank of England is edging towards a tightening of policy. Should this tightening bias become more overt, then the GBP will perform well on all crosses.”

“Finally, against the JPY the move is likely to depend on the global risk environment. In an environment where volatility is not spiking and inaction from the BoJ results in no Japan-specific factors at play, the cross will remain range-bound, with a slight upwards bias. That said, should Fed actions or rhetoric drive a spike in volatility, the AUD/JPY would be one of the most vulnerable crosses and could weaken sharply.”

Daniel Been, Senior FX Strategist at ANZ, offers the outlook for AUD/USD and crosses, noting that USD is set to assert dominance against the commodity currencies.

(Market News Provided by FXstreet)