AUD/USD - Bearish consensus building for 2018 - Reuters News

Reuters forex news report says, "a number of investment banks are building a bearish case for the AUD/USD to play out in 2018." It adds, "don't be surprised to see a number of sub-70 cent calls for AUD/USD when the major banks release their 2018 forecasts before year-end."

Key points

bears are focused on central bank expectations and interest rate differentials, but there is also some concern over China's ability to manage its debt bubble.

The RBA is widely expected to remain on hold for at least another 12 months while expectations for Fed tightening in the investment bank community range from two to four rate hikes in 2018.

The US 2-year yield (1.76%) is now higher than Australia's 2-year yield (1.74%) while the Aus 10-year yield is still 13bps higher than the US 10-year yield, which is 2.38%. If RBA & Fed projections prove accurate, there may end up being a significant USD-favourable yield spread between the two currencies.