The Australian dollar’s strong support from commodity prices produces fair value estimates within the mid-0.80s yet recent price action has been within the mid-0.70s. What’s more, the reverberations from the FOMC keep a lid on the aussie, around say 0.7645, but support around 0.7500 looks solid given equity rebound and resilient commodities, consistent with economists at Westpac.
AUD/USD fair value range mid 0.8550
“Commodity prices are choppy but overall remain very supportive for the aussie. along side ore still above $200, prices are robust for both thermal and coking coal, plus LNG as oil keeps surging.”
“We are now projecting a better profile for both US and Australian yields, but the increase in AU yields had the larger impact on our short-term fair value model. it’s now within the mid-0.80s, versus spot within the mid-0.70s. Spot divergence from any fair value model of any currency is to be expected but it’s hard to not see A$ higher multi-week/month.”
“We had been looking to shop for AUD/USD as cheaply as 0.7400/25, with fair value nearer 0.85. But the fast stabilisation in equities and mixed Fed rhetoric post-meeting suggest a replacement , lower, range is in situ , mostly 0.7500-0.7645.”