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.
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.