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Flash: AUD strategy profile – Westpac

FXstreet.com (Barcelona) - According to Global FX Strategist Sean Callow at Westpac, “The AUD remains the weakest G10 currency in May but there is a growing case for at least an interim bounce, thanks in large part to the encouraging 2013/14 capex survey.”

At some point the Aussie is surely oversold. We prefer to play this against GBP (short GBP/AUD at 1.5651, target 1.5200). It is harder to play for a bounce against USD so long as the jury is still out on the Fed’s stance in late summer. The mid-0.97s will probably cap on the week while 0.9530 support holds. We still see AUD/USD higher over the month on softer US data but expect ongoing volatility en route to 0.98.

It is a very crowded calendar in the week ahead. Friday we see April private sector credit but the pace really picks up on Monday with a slew of data, most notably April retail sales and Q1 GDP inputs inventories and company profits. On Tuesday we see Q1 BoP (incl. what should be a solid net exports contribution to GDP) and the RBA meeting. Pricing for a Jun cut eased to <20% after the capex data but markets will be edgy. A steady hand would probably be accompanied by a statement reiterating scope to ease again. On Wednesday it is Q1 GDP, set to confirm sub-trend growth and finally on Thursday, April trade data, probably a sizeable surplus.

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