Australian dollar forecasted to be endure fresh selling pressure, 0.90 forecast vs US dollar

Those tasked with forecasting exchange rates at TD Securities have told clients that they see a renewed onslaught against the Australian dollar ahead.

The call comes as the Australian dollar experiences consolidation, and indeed, fresh advances:

"Support levels near .9130/50 held yesterday despite some very heavy pressure and with the USD taking a beating across the board, we can expect a test of vital resistance levels at .9330/50 at some stage today. I believe a base is in place, this resistance will break and we will be trading close to more neutral levels around 96 cents in a few weeks," says
Sean Lee at FXWW.

While the above analysis is based on technical charts, the team at TD Securities rely on fundamental macro-economic analysis as a basis of their call.

Alvin Pontoh at TD Securities in Singapore says he sees a retest of 0.90 for the Australian dollar versus the US dollar:

"After two months of steep depreciation, the AUD has taken a bit of a breather so far this month, stabilising within a range of USD0.90/93. In the next month or so, we suspect it’s bear territory for the AUDUSD, and a re-test of the key 90c is not out of the question.

The Australian dollar / New Zealand dollar exchange rate is also forecast to come under pressure:

"We also continue to see more downside to AUDNZD (spot 1.14) after Wheeler’s unexpected hawkish turn this week. Our 1.13 target for mid-2014 could be reached before the end of the year!"

AUD Headwinds to Intensify, thanks to China

Having failed to sustain a rally on the back of this last week's inflation data, TD Securities advise are of the view that the AUD may test fresh cycle lows in the coming weeks.

Pontoh says China will be a key driver of fresh Aus dollar declines:

"Concerns over Chinese economic growth are likely to intensify after Wednesday’s poor HSBC manufacturing PMI (47.7 compared with prior 48.2), notwithstanding today’s announcement of a “mini stimulus”. Those concerns may be exacerbated by the fact that the Sept qtr is a weak one for iron ore prices, the single largest commodity in Australia’s export basket.

"Asia’s steel production typically dips from next month, accompanied by falls in the iron ore price in Aug/Sep, before recovering in Oct/Nov as China re-stocks (see chart below). This year, a supply surge from Australia may compound the weakness, and this will almost certainly fuel talk about a ‘hard landing’ in China, again."