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AUD/USD seen at 0.68 in 12-month – Danske Bank

FXStreet (Edinburgh) - Kristoffer Lomholt, Analyst at Danske Bank, expects the Aussie dollar to grind lower towards the 0.68 handle in a 12-month horizon.

Key Quotes

“While the AUD in recent weeks has gained on improved risk sentiment and reduced China-worries we still expect more AUD/USD downside supported by both a weaker AUD-leg (terms of trade chock weighing) and a stronger USD-leg”.

“Importantly, we do not see a RBA rate cut as a prerequisite for further AUD/USD-weakness. In our view the significant drop in the currency over the last year will be a sufficient cushion against lower Chinese demand and currently we do not pencil in further rate cuts”.

“As a result we expect a re-pricing of Australian monetary policy (more than a full cut priced on 12M) together with speculative short-covering to counter some of the AUD/USD downside potential”.

“In light of the recent AUD-support we lift our 1M projection to 0.71 (from 0.70) but leave our 3M, 6M and 12M forecasts unchanged at 0.69, 0.68 and 0.68, respectively”.

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