Ask most analysts and they will tell you that the Australian dollar will trade down in the mid to high 60’s in 2016. That weakening trend has been the conventional view over the past year as forex traders have continued to sell the Australian dollar on the back of falling commodity prices and crashing terms of trade.
So far though the Aussie has resisted the most dire forecasts of its demise with a post-GFC low of 0.6893 in September this year. That was at a time when stock markets were in a funk and investor sentiment was at its lows.
But since then the bears have been frustrated as the Australian dollar has remained “sticky” above 70 cents, as Rob Rennie Westpac’s global head of market strategy puts it.
One of the reasons Rennie gave earlier this month for the stickiness was that “back in September, when the A$ last traded below 0.70, the speculative community was running significant shorts. However, since then that community appears to have stepped back, adding to demand.”
So it’s worth noting that the latest positioning data for these speculative traders, released by the Commodity Futures Trading Commission in the US on Friday night, shows that speculative accounts were long the Aussie dollar for the first time since September 2014.
CFTC data shows specs net long AUD for first time since Sep 2014, at 15/12 close. Suspect this will be short-lived pic.twitter.com/GTHqo16yuN
— Sean Callow (@seandcallow) December 20, 2015
Clearly Westpac’s currency strategist Sean Callow thinks this is only a transitory phenomenon before the selling begins anew. That’s a fair bet given the data was for positions as at the 15th of December, pre-FOMC meeting and when the Aussie dollar was closer to 73 cents. So he’s likely to be right.
This switch to a net long position could be the high water mark for the Aussie and forex punters who may go short – sell Aussie – again looking for lower levels. But as Rob Rennie told Business Insider Friday, the Australian dollar is likely to frustrate the bears again in 2016.