Technical Analysis

AUD/USD forecasts – upside range break remains central scenario for H2 2020

National Australia Bank with projections for the Australian dollar (NZD also included in pic)

On the AUD, citing:

  • Latest strength in commodity prices and risk sentiment have together pulled our short term fair value estimate up from the 0.68-0.69 region to 0.69-0.70
  • AUD/USD remains very fairly valued at current levels, both with respect to our short term fair value model (shown above) and longer term valuation metrics.
  • suggests we need to see some further improvement in risk sentiment and/or commodity prices to readily justify a (sustainable) top-side break of the prevailing 0.6750-0 0.7050 effective range
  • An upside range break remains our central scenario for H2 2020 (year-end forecast 0.72) consistent with an ongoing, infrastructure-heavy China economic recovery and related commodity price strength, and a softer USD.

key risk to this view

  • anything that prompts a significant correction in risk sentiment, where internationally we would list the approaching US election as high on the list.
  • Locally, poor Australia-China international relations are a risk only in so far as Australian exports to China are impacted on a much bigger scale than to date.

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