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Sep 17, 2014
AUD moving in line with expectations - BAML
FXStreet (Guatemala) - Adarsh Sinha, FX Strategist at Bank of America Merrill Lynch announced that the recent drop in the AUD has been in line with our expectations.
Key Quotes
"We flagged downside risks on 12 August and recommended selling AUD versus the CNH on 1 September. Our big picture message on the AUD had been simple - fundamentals (particularly the balance of payments) would align for a big drop in 2015, but selling it close to 0.95 was always good risk-reward given our view that it would decline to 0.80 in 2015."
"But the main question that we have faced from clients over the past week has been whether the price action presages a sharper drop in the AUD than we expect and earlier than 2015. Indeed, we are already within striking distance of our end-2014 forecast of US$0.88."
"In this note, we argue that while the probability of a larger "front-loaded" drop in the AUD, say to 0.85, has risen, we remain comfortable with our once out-of-consensus, now conservative 0.88 target. We remain short AUD/CNH (entered at 5.7482, targeting 5.40) but recommend lowering the stop to 5.70 following the recent sell-off."
Key Quotes
"We flagged downside risks on 12 August and recommended selling AUD versus the CNH on 1 September. Our big picture message on the AUD had been simple - fundamentals (particularly the balance of payments) would align for a big drop in 2015, but selling it close to 0.95 was always good risk-reward given our view that it would decline to 0.80 in 2015."
"But the main question that we have faced from clients over the past week has been whether the price action presages a sharper drop in the AUD than we expect and earlier than 2015. Indeed, we are already within striking distance of our end-2014 forecast of US$0.88."
"In this note, we argue that while the probability of a larger "front-loaded" drop in the AUD, say to 0.85, has risen, we remain comfortable with our once out-of-consensus, now conservative 0.88 target. We remain short AUD/CNH (entered at 5.7482, targeting 5.40) but recommend lowering the stop to 5.70 following the recent sell-off."