AUD/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

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Published: Aug 20, 2016, 07:03 UTC

The AUD/USD closed the week at 0.7619 gaining after a better than expected jobs report. The Aussie eased a bit on a weekly basis but has climbed almost 4%

AUD/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

The AUD/USD closed the week at 0.7619 gaining after a better than expected jobs report. The Aussie eased a bit on a weekly basis but has climbed almost 4% this year. Australia’s central bank is far more uneasy about the current high levels of the Australian dollar than it has let on, according to QIC, one of the country’s biggest government pension managers.

Trading at 0.77 late on Thursday, the Australian dollar may be as much as 10 per cent overvalued as measured by the Reserve Bank of Australia’s in-house economic modelling, a level sure to be “really tough” for exporters, said Katrina King, head of global liquid strategies at QIC.

“They haven’t been publicly articulating that, but we have a very similar model to them, and it’s very terms-of-trade related, and it’s way above value at the moment,” she said.

Comments by the Fed suggested consideration of a rate rise could be drifting into next year. Investors have clear doubts about the Fed’s willingness to move again. Markets on Thursday put a 12 per cent probability on a Fed rate increase in September, 16 per cent on a move by November, and 48 per cent by December.

Ms King said a Fed increase now looks likely to be delayed until the first quarter of next year, providing scope for markets to confidently bid up the Australian dollar in the interim. For the moment though traders are not listening and the US dollar remains under pressure. That’s keeping the Australian dollar supported even though sellers are lurking above 77 cents at present.

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Week of August 22-25, 2016

Date	Country	Name	Volatility	Previous
8/23/2016	GBP	Inflation Report	3
8/24/2016	EUR	GDP w.d.a (YoY)	3	1.8
8/24/2016	EUR	GBP s.a (QoQ)	3	0.4
8/24/2016	EUR	GDP n.s.a (YoY)	3	3.1