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CBA Build Bullish Case For AUDUSD

AUSTRALIA
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  • CBA have noted several factors that support their bullish AUDUSD sentiment for the remainder of 2024 and into 2025.
  • Components including Australian commodity prices, interest rate differentials, and risk appetite suggest the pair is undervalued from a fair value perspective. Additionally, CBA’s intuition is that modest Fed rate cuts imply the US economic outlook, and by extension the global economic outlook, will be reasonable in the coming year, which should in turn support AUDUSD.
  • CBA also cite that speculators have been unusually short AUDUSD for quite some time and given low levels of volatility provide an additional AUD tailwind, positioning dynamics may exacerbate a further unwind.
  • Additional factors supporting the bullish thesis include supply chains largely normalising and geopolitical tensions not necessarily being an Aussie negative - via the competition between the ‘west’ (broadly defined) and China potentially encouraging capital flows into Australia.
  • On the other hand, CBA do acknowledge they expect the RBA to cut its cash rate by more than the market is pricing. Combining this with the upcoming US election and Chinese economic trends, these represent the potential downside risks for the AUD, moderately offsetting the bullish case.
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  • CBA have noted several factors that support their bullish AUDUSD sentiment for the remainder of 2024 and into 2025.
  • Components including Australian commodity prices, interest rate differentials, and risk appetite suggest the pair is undervalued from a fair value perspective. Additionally, CBA’s intuition is that modest Fed rate cuts imply the US economic outlook, and by extension the global economic outlook, will be reasonable in the coming year, which should in turn support AUDUSD.
  • CBA also cite that speculators have been unusually short AUDUSD for quite some time and given low levels of volatility provide an additional AUD tailwind, positioning dynamics may exacerbate a further unwind.
  • Additional factors supporting the bullish thesis include supply chains largely normalising and geopolitical tensions not necessarily being an Aussie negative - via the competition between the ‘west’ (broadly defined) and China potentially encouraging capital flows into Australia.
  • On the other hand, CBA do acknowledge they expect the RBA to cut its cash rate by more than the market is pricing. Combining this with the upcoming US election and Chinese economic trends, these represent the potential downside risks for the AUD, moderately offsetting the bullish case.