AUD/USD ranges have compressed - Westpac

AUD/USD ranges have compressed over the past week as there has been some support from yield-linked USD declines (10yr Treasury note sub-2.20%) and from commodity prices – while iron ore has been choppy, with Westpac’s Australia Export Commodity Price Index (WCFIAECI on Bloomberg) has made new highs since early May, albeit only marginally, explains Sean Callow, Research Analyst at Westpac.

Key Quotes

“But keeping a lid on AUD/USD rallies have been the occasional USD bounce on hopes of agreement on tax reform/cuts and perhaps the sheer weight of long positioning. Speculative accounts in US futures markets last week held their largest net long AUD position since April 2013, with a face value of nearly AUD8bn.”

“At that time of course AUD/USD was around 1.05 and just about to tumble. But so long as commodity prices hold up near term and Q2 GDP shapes up as decent, then the 50dma at 0.7798 should hold, with rallies faltering ahead of 0.80.”