Analysts at MUFG Bank, continue to see a trade idea in going long the AUD/USD pair with a target at 0.7895 with stop loss at 0.7460. The point out the global optimism should lift the Australian dollar to fresh cycle highs.
“The better vaccination outlook in Europe and positive growth prospects in China should allow for a slow grind higher for AUD/USD. Bloomberg’s commodity price index has risen sharply over this mot to its highest level since mid-2018, and global equity markets to fresh record highs. The combination of Australia’s improving terms of trade and risk seeking behaviour remains favourable for the AUD.”
“The recent domestic data flow from Australia has started to disappoint expectations suggesting tentatively that the recovery is starting to lose some upward momentum. Most notably, underlying inflation fell to a new record low. It has reinforced expectations that the RBA will extend QE further beyond September, although it will likely be too soon for a policy announcement at next week’s meeting. It poses some modest downside risk for the AUD and in any case, any correction lower would likely be modest given the building optimism globally and the positive terms of trade developments of late.”