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Andreas Zanin
Analysis | December 15, 2020

AUD Outlook and Forecast – Best Pairs to Trade AUD V CAD, JPY & GBP

In yesterday’s post, we looked at AUD/USD which has been in a big bullish uptrend, and the potential for a short-term reversal. In this post we will look at some AUD crosses – AUD/JPY, AUD/CAD, and GBP/AUD.

As we noted yesterday the big news for the Aussie in recent weeks has been soaring iron ore prices (Australia’s biggest export) which have risen over 90% since April. Our view is iron ore prices are a speculative bubble that is about to end – Chinese steelmakers have requested regulatory action and today we are seeing Iron ore prices fall back and expect further declines to pressure the Aussie lower.

The Aussie has also been strong due to the risk on in the markets with stock markets firm and traders looking for a V-shaped global recovery which in our view is now discounted. Tomorrow we have a high-impact news event FOMC. The Fed and as we noted yesterday are unlikely to be more dovish than the market expect and we could see a USD rally.

The AUD in our view is at an overbought extreme v the USD and if we do get a USD rally, the Aussie will be one of the currencies that could be hit hardest which makes it a potential sell not just against the USD but against other majors. Key technical levels to watch on the charts below…

Technical Analysis

AUD/CAD DAILY CHART: The AUD is trading just below chart highs and prices are stalling at the 0.9600 level. In terms of going forward, we expect the CAD to be the best performing commodity currencies based on Central bank action, bond yields and commodity prices and expect the Aussie to fall back to 0.9400 and possibly 0.9230 to correct its overbought condition.

AUD/JPY DAILY CHART: The JPY like the USD has been weak due to its safe haven status and the Aussie has been in a big bull run since November, but we are now seeing prices stall and volatility drop as we try to breakout to new chart highs. We view the Aussie as a sell through nearby double trend line support for a move to 78.00 with a possible run on to 76.00.

GBP/AUD DAILY CHART: The GBP is influenced by BREXIT trade talks and the market sold it down on the chances of a no deal becoming reality. Our view remains that the odds of a deal are high. The GBP after moving back above the 1.7600 level could trade up to 1.8300 to correct its oversold condition – Any move down through support at 1.7600 would be a buy back above the level with a stop behind the exhaustion tail.

 

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