#EURAUD #AUDUSD Medium and Long term outlook and positioning

Most analysts agree that #AUD will either underperform or range in relation with other currencies.  A few that supported the idea the it will rise have not been proven right in their future projections.

Nomura, recommends remaining long in #EURAUD and short in #AUDUSD

ANZ is giving the forecast shown in the picture below:

NAB maintains the following forecast (marked new):

WestPac has revised its previous forecast and expects #AUD to end 2018 at 0.70USD instead of 0.65

Commonwealth Bank is one of the few optimists:

Mathematical models based mainly on historical data, forecast a sharp decline on the #AUDUSD (dropping to 0.71)  until the middle of 2018, and a recovery to current levels by the end of 2018.
For the AUDEUR rate, the forecast is a decline in 2018 that could reach 0.55.

Trend indicators do not show any major trend on #AUDUSD at the moment.
However  as it can be seen, the price has decisively crossed large EMAs on the Daily chart and it is moving steadily below them on the weekly chart.

#AUDUSD Daily

#AUDUSD Weekly

On #EURAUD a clear uptrend can bee seen on the Daily chart and on the Weekly charts the price is decisively above large EMAs

#EURAUD Daily

#EURAUD Weekly

A factor that will have great influence on the moves and direction of #AUD is the RBA monetary policy.  There is no indication that a rate hike will happen any time soon.  On the contrary the consensus is that if it happens it will be the end of 2018.

Other central banks are planning (at least as the market expects) to proceed with rate hikes.  There is an obvious divergence in policies here that puts pressure on #AUD.

FED is widely expected to proceed with a rate hike during this month.  Although the markets have not priced this in yet, if it is delayed for early 2018 it will put further pressure on #USD.

However, a rate hike by FED is considered as a certainty by the markets.   Most analysts forecast that it will not be the only one, but merely the first of two or three hikes until the end of 2018.

The implications on #AUDUSD of this divergence in monetary policies between FED and RBA are obvious.

Commodity prices are a another factor that has heavy influence on #AUD. Analysts mostly agree that commodity prices look set to fall.  Some suggest a greater than 20% fall in the bulk Commodity Index and a greater than 25% fall in iron ore price. China's reform policies and the consequent slowdown in its industrial demand, will have an additional effect.

Economic data and forecasts suggest that the #EU will continue to improve throughout 2018 on its already good economic data, so the outlook is positive.

Politically it has emerged stronger after the #EUR crisis and #Brexit, and markets are not sensitive anymore to minor or medium range political events in the EU.

ECB continues to normalize its policy.

Based on the above, positioning for #EURAUD is long and for #AUDUSD is short, in the medium to long term.

As it seems highly unlikely for #AUD to turn bullish, a moderately more aggressive trading is not considered high risk.  

Update 8 December 17
https://twitter.com/dimitfx/status/939072210991501312

Update 8 December 17
Morgan Stanley sees a negative outlook for #AUDUSD for 2018.  It gives an estimate of a range between 0.76 and 0.77 for the first two quarters and a gradual decline to 0.67 for Q3 and Q4.
Their arguments include a reduced growth potential of the Australian economy.

Update 12 December 2018
UBS analysts argue that when house prices weakened towards flat or negative over a 6-month period, RBA cut the rates within months.  This happened in 7 out of 9 cycles.

Hence a rate cut is probable.
Other research teams maintain their position that the next rate move will be up and they position it towards the end of 2018.
BlackRock is one of them which positions the next hike on Q4 2018.

Update 14 December 17

#AUDUSD Levels q1 q4 2018

#EURAUD Levels q1 q4 2018