AUD/USD to drop below the 0.7050 level – Westpac

AUD/USD is only down about 30 pips from this time last week but that leaves it weakest in the G10. Economists at Westpac see plenty of risk of further equity turbulence on US political headlines, with extra weight from Reserve Bank of Australia’s firmly dovish tone. The aussie risks a fall  below 0.7050 but the 0.7000 level should hold.

“China is never far from the headlines for the A$ and this week we had fresh wobbles on reports that China was turning away cargoes of Australian coal, both thermal and coking. Australia’s trade minister is awaiting clarification on whether Australia is being singled out, but Q4 each year coal import quotas become a live issue.” 

“Domestically, AUD has to bear the increasing weight of RBA dovishness, with Governor Lowe today noting that other CBs have expanded their balance sheets by more than the RBA has, with implications for exchange rates.” 

“AUD/USD remains sensitive to US equity swings, so while many would like to coast on a ‘blue wave’, turbulence seems likely. Look for rallies to struggle above 50-dma at 0.7207, bias back to 0.70 handle.”

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