NAB: Bending But Not Yet Decisively Breaking Our H1 Range Top

NAB note that “since the start of the war in Ukraine, AUD/USD has been subject to the competing influences of the sharp rise in Australia's overall terms of trade - led by strong gains for oil (gas) coal and iron ore, but a deterioration in risk sentiment indicators most relevant to the AUD. The former has, self-evidently, won out over the latter to see the upper end of our $0.70-0.75 H122 forecast trading range bent but not, as yet, decisively broken.

• “We see much of the recent run-up in commodity prices being maintained even in the event of some form of peace agreement between Russia and Ukraine, with sanctions (self-imposed by the private sector or otherwise) likely to remain in place for a long while, albeit some of the energy security risk implicit in coal and gas prices could fall out.”
• “Despite a temptation to bring forward our $0.75-0.80 H222 forecast trading range by a quarter or so, we take the view that after some extraordinary moves in commodity and global interest rates markets of late, some consolidation of recent AUD gains, if not an outright reversal, is a realistic near-term prospect ahead of a fresh leg higher in all things AUD. Besides, if the moves we have been seeing in some markets were to extend it would surely add to the view that global recession risks are rising (given an increase in demand destruction), never a good look - historically - for commodity/pro-cyclical currencies.”