In contrast to the consensus view I remain rather constructive on the AUD. As reflected in the RBA minutes today the central bank has shifted its stance somewhat, effectively closing the door on further policy easing while finding it difficult to talk the currency lower as inflation pushes higher.
Separately although Chinese growing is slowing this year assuming that growth does not fall too far and too quickly the AUD is unlikely to suffer much from this source.
A lot bad news for AUD has been largely priced in. Firstly, the drop in AUD/USD has been consistent with the deterioration in terms of trade.
Secondly Australia’s broad basic balance position is quite healthy as strong direct investment and portfolio inflows counter a current account deficit.
Thirdly, even when looking at China’s growth trajectory the AUD is at a level which discounts this. Near term resistance for AUD/USD is seen around 0.9087.
ECONOMETER 
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