NAB: When the Australian dollar breaks out of its range it's likely to be to the downside

Photo by Julian Finney/Getty Images for DAGOC

The Australian dollar has traded in a thin range between .7440 and .7750 against the US dollar for the best part of three months now.

It’s been an unusually quiet period for the AUD/USD, as shown in the chart below from the National Australia Bank (NAB).

According to the bank’s FX strategy team, when this range finally breaks — be it to the upside or downside — it will almost certainly be as a result of a move in the US dollar, not the Aussie itself.

Here’s the NAB’s view:

A range break-out in AUD/USD, when it comes as it surely will, still looks like it will have to emanate from the US dollar side of the equation. With the latest US payrolls report failing to provide an immediate catalyst, it is hard to escape the view that it probably won’t come until after the US election.

According to the NAB, “whether because a Clinton victory is seen to clear the decks for a Fed move in December, or a Trump victory engenders at least a short term significant ‘risk off’ move, we still favour the break coming to the downside”.

The AUD/USD currently buys .7590.

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