AUD/USD has reversed the move after US elections, which pushed the pair as low as below 0.72 around year end. The lack of details of the US administration’s economic plans has weighed on USD and supported AUD in January-February. Furthermore, improvement in Australian economic data together with a more optimistic tone from the central bank has helped AUD to return to pre-Trump levels.
However, we still think the RBA wants to limit the upside in AUD and is ready to soften its tone in case the exchange rate appreciates excessively.
We expect AUD/USD to back down from overbought levels over the next one-three months. Our 1M forecast is 0.75, 3M forecast 0.73 and 6-12M forecasts 0.74 and 0.75, respectively.
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