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AUD: Round tripping but risks remain to the downside - NAB

FXStreet (Delhi) – Research Team at NAB, suggest that the Aussie has been on a four cent round trip from 0.68 to 0.72 in the last two weeks but presently remains under pressure as the global environment has deteriorated for the AUD and the worsening outlook for commodity competitors introduces a new factor.

Key Quotes

“The volatility and interest rate outlook are also factors keeping AUD in check. As it becomes clear that the Fed hasn’t taken a hike off the table altogether, we are back worried about global demand, a rise in risk aversion, and lower commodity prices.”

“The unwinding of short positions has been a near term benefit, but it is not enough to push AUD through the topside support that has been in place from August.”

“However, if the Fed decide to remain on hold, it is likely to be because the global environment is not stable enough to ensure the Fed is comfortable starting the normalisation process. That would weigh on Australian yields and likely raise market risk indicators. Both of these would suggest the risk adjusted differential was also in favour of a weaker AUD/USD. Given this, we continue to see the risks to the AUD to the downside.”

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