Never miss a story from David de Ferranti

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David de Ferranti

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

AUD To Look Past Local Data Yet Remains At Risk On Elevated Volatility

Fundamental Forecast for Australian Dollar: Bearish

  • AUD/USD Suffers Intraday Volatility Yet Remains Above 2014 Low
  • Scope For Gains Questionable As Elevated Volatility Caps Carry Demand
  • Downside Risks Centered On Recent Lows Near The 0.8540 Mark

The Australian Dollar witnessed another week of intraday volatility, yet limited follow-through. Local economic data once again proved uneventful for the currency, amid well-anchored RBA policy bets. Indeed the latest Minutes reiterated the central bank’s preference for a “period of stability” for rates and offered few fresh insights into policy makers thinking.

Looking to the week ahead; local Capital Expenditure and New Home Sales data headline the domestic economic calendar. Rampant speculative lending in the housing market has been a concern for policy makers and has created a reluctance to cut rates further. However, the rather volatile upcoming home sales data is unlikely to materially alter the rate outlook. Similarly, it would likely take a significant surprise to the Capex figures in order to change policy bets. This in turn could continue to leave the Aussie to take its cues from elsewhere.

One of the biggest threats to the currency remains the potential for a further pick-up in implied volatility. Measures like the CVIX are near their peaks for the year suggesting traders are anticipating some large price movements amongst the major currencies. Such an environment generally bodes ill for the high-yielding currencies, who stand to outperform in low-volatility settings.

Meanwhile futures positioning suggests the wave of short-selling has turned into a trickle. Yet it remains off the extremes witnessed last year, suggesting more room may exist in the trade.

Downside risks for AUD/USD are centered on the 2014 lows near 0.8540, which if broken may set the pair up for a run on the July 2010 trough near 0.8320.For insights into the US Dollar side of the equation read the weekly forecast here.