AUD to re-test the recent range highs - ANZ

In view of the Daniel Been, Head of FX Research at ANZ, the recent pace of change in market dynamics has left the AUD behind and while traditionally a rise in liquidity, an improvement in global growth, a decline in market volatility and signs of under-valuation would have driven the AUD higher, more recently it has lagged.

Key Quotes

“We think that many of these factors could persist in early 2017 and the AUD stands to benefit. We recommend buying AUD at USD0.7370, with a target of USD0.78.”

“When combined we think the current environment of a negative risk premium, conservative valuation, solid global growth, lower volatility and rising liquidity should be sufficient to drive the AUD back towards its range highs. This remains a tactical view for now. Our central commodity forecasts suggest that fair value will temper somewhat from here, while we also remain concerned that when the liquidity cycle does turn, the AUD will come under severe pressure. However, these concerns are unlikely to play out in the near term.”