AUD remains a buy on balance – Westpac

Research Team at Westpac, suggests that the AUD remains a buy on balance, though their model, macro and technical inputs are overall more lukewarm on AUD vs NZD and not strong enough to warrant a buy on dips.

Key Quotes

“On the plus side, the domestic growth story is a positive and the RBA inflation targeting agreement has been modified in ways that reduces the urgency to cut in the face of weak inflation. But, for the time being AUD’s fortunes will be determined offshore. The BoJ seems likely to stoke volatility, a net negative for AUD/USD. Yet the Aussie has been fairly resilient in the face of BoJ turbulence this year. Moreover, the FOMC punting on a rate hike until Dec while cutting forecasts should undermine USD and thus boost AUD. With support also from key commodities, AUD should find buyers on dips to the mid-0.74s.

On the other side of the ledger our process remains cautious on USD and CHF. Not convinced that a meaningful run up in the USD is on the cards - the ECB appears to be in no rush to extend QE, our US data surprise index has not yet found a bottom and the Fed is unlikely to deliver anything more than a “dovish hike” in December.”