It was a frosty month for Aussie dollar bulls in November with a high above 95 cents, before concerted and aggressive efforts by RBA Governor Glenn Stevens drove it back down to the mid-90 cent region late last week.
But after such a poor month the currency strategy team at the NAB reckons the Aussie dollar just might be a little oversold at the moment.
They note that the RBA’s aggression throughout the month “persistently” knocked the Aussie lower but added: “It may take, at a minimum, a continuation of such rhetoric in order to generate the same impact in December.”
Indeed the impact of the sell off in November is such that the Australian Dollar is below fair value on the NAB’s traditional fair value model which has an implied value of 0.9210 against a spot of 0.9120 at present, while another model that accounts for the Fed’s QE (bond buying) and impact on interest rates has fair value at 1.0150.
So the NAB team reckons the news is baked in the cake and that the Aussie has a good chance of finding support around these current levels. From their latest note:
The AUD has come a long way in a short period of time: the RBA’s persistent jawboning, the market’s belief in the Fed’s tapering, and the weaker than previous foreign investment environment are all AUD negatives.
However, these factors are now likely in the price. We would be buyers of AUD under 0.9050.
So there you have it – perhaps we’ll see a Santa Claus rally in the Aussie dollar to help with all that online shopping?