AUD/USD - below 23.6% Fib, eyes yield differential & budget update
|- AUD flat lined below 0.7648 (23.6% Fib R of Sep/Dec decline).
- Negative Aus-US rate spreads could hurt AUD.
- Focus on the Aussie mid-year budget update.
AUD/USD is trading in a sideways manner below 0.7648 levels in Asia as investors await the Aussie mid-year budget update.
According to Westpac, forecast nominal GDP growth for 2017/18 is likely to be upgraded to 4.5% from 4.0% at Budget time.
While the upward revision of the GDP would be AUD positive, still sustained gains would require a sharp rise in the AUD-US yield spread. Bill Evans, Chief Economist at Westpac fears that a sustained period of negative Australian vs US rate spreads could lead to a move down to USD 0.68 in 2019, with downside risks.
Evans expects the Fed to hike rates twice in 2018. He adds, " That would see the AUD/USD yield differential in the overnight market contract to minus 38 basis points – a situation we have not seen early 2000. A heavy toll will be taken on the AUD with the currency forecast to fall to USD 0.70 by the end of 2018."
AUD/USD Technical Levels
Jim Langlands from FX Charts writes, "the short-term indicators are now pointing lower, and a run back towards 0.7620/30 would not surprise, below which would allow a run back to 0.7600 and possibly to 0.7575/80. The dailies still currently look positive but as I said previously, now that US rates are at parity with Australian rates I do not really think that the Aud has too much upside from here, and I would be looking for levels to sell into strength.
Resistance today lies at 0.7665/70
Sell AudUsd @ 0.7670. SL @ 0.7705, TP @ 0.7580
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.