AUD not immune to market repositioning - Westpac

Sean Callow, Research Analyst at Westpac, explains that the Aussie has shown this month that it is not immune to market repositioning for an earlier than expected start to the Fed’s 2017 tightening steps, with only faltering bounces since the key 2 March slide.

Key Quotes

“CME positioning has been a useful guide to the overall market in recent years. This implies further reduction in AUD/USD longs near term, with the global focus on the Fed’s rate hike next week.”

“This points to 0.7450, a 50% retracement of the 2017 rally. But that may be far enough. The US 10yr yield peaked on the day of the Fed’s Dec hike, despite its positive rhetoric. Attention may swing back to US politics, where tax reform is taking a back seat to healthcare.”

“The RBA’s upbeat outlook also helps ensure yields don’t cause much more damage: the 10yr AU-US spread is very range-bound. The 3 week low for spot iron ore may be more relevant to where AUD stabilizes – assuming it does.”