FBS: what about AUD?
Australian dollar made an impressive bullish move on Wednesday, testing the levels above $0.9510 (38.2% Fibonacci retracement). Dovish Fed’s comments caused a significant depreciation of the US dollar and a rise in risky currencies.
It is now more or less clear that the Fed’s monetary policy will remain loose at least for the next couple of month. So, the market is likely to focus on the RBA policy in the near future: how high will the Australian regulator let the currency go? Will Australia lower interest rates further in order to stimulate the economy? We lean toward more RBA easing on the November meeting.
Generally, we believe that the Aussie has some more room to extend growth in the coming weeks. The “double bottom” pattern (remember our last week’s article on AUD/USD) shows the pair could rise to the $0.9645/60 area (June highs, 55-months MA). In the near term we see a need for some bearish correction below $0.9500/10, but expect the $0.9350/35 area to limit the short-term downside. Slide below $0.9225 would, actually, be a bearish signal.
Watch China HSBC flash manufacturing PMI on Monday and the RBA financial stability review on the economic calendar.
Chart. Daily AUD/USD