AUD should be capped around 0.7650/00 - Westpac

Martina Song, Research Analyst at Westpac, notes that the Australia’s recent domestic data – business and consumer sentiment, jobs – have been mostly positive.

Key Quotes

“While risk sentiment has been supportive this week, AUD traded well despite the negative shocks the week before.

Commodity prices have so far been supportive of AUD as well. With expectations of additional stimulus in Japan as well as China, industrial metals have made gains. Fundamentally however, it seems this rally, especially in iron ore cannot last. Iron ore supply should continue to grow while any stimulus from China should be less concentrated in construction.

Price action in AUD recently has been rather bullish. In the week ahead though, focus should return to the RBA as we head towards the end of the month and closer to the key Q2 CPI update. The case for a cut at the Aug meeting should keep AUD capped around 0.7650/00. On the other hand, demand for yield should stop AUD from falling below 0.7400.”