Support AUD enjoys from sharply higher commodity prices is not fragile - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the AUD/USD narrowly took out the August highs this week, reaching 0.7778 in anticipation of a Hillary win while the Trumpdriven selloff reached 0.7580 before steadying in the familiar mid-0.76s.

Key Quotes

“The price action was less dramatic than on Brexit day, even though Trump’s focus on Asia trade surely means greater direct impact on Australia’s economy. This suggests that the support AUD enjoys from sharply higher commodity prices now compared to June is not fragile. Doubts remain over sustainability yet the gloomy baseline predictions for coal and iron ore at end-2016 can be pushed into 2017.”

“So long as the wages & jobs data doesn’t stir RBA rate cut talk, the commodity rally should help AUD/USD find buyers near the 100dma at 0.7590, while being capped in the 0.7750/75 region given the doubts over Trump’s plans for Asia.”