Morgan Stanley sees the Aussie dollar hitting 84 cents 'over the coming weeks'

JAIME REINA / AFP / Getty Images

Having surged 10% from early May to late July, the price action in the AUD/USD has looked a little iffy recently, seeing the the pair drop back below the 80 cent level this week.

The modest pullback, seen in the daily chart below, has more than a few traders questioning whether the Aussie’s rally has done its dash.

Source: Investing.com

However, while some think that a more pronounced pullback or a period of consolidation is on the cards, Morgan Stanley’s FX strategy team thinks that there’s a bit more upside to come for the Aussie, at least in the short-term.

Here’s its assessment:

We remain tactically bullish on AUD, with its high carry status and continued USD weakness likely to propel AUD/USD to 0.84 over the coming weeks. The RBA highlighted the disinflationary and growth-negative impact of AUD appreciation in its statement though the market continues to look through these dovish leanings.

84 cents in just a few weeks, representing a 5.5% gain from it’s current trading level of .7960 should Morgan Stanley’s call be on the money.

While the bank is bullish on the Aussie near-term, it remains a staunch bear longer-term, suggesting that Australia will be vulnerable to issues relating to its housing market and its sensitivity to global funding costs.

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