USD AUD

FXstreet.com (Barcelona) - Forward-looking indicators of the global industrial cycle suggest economic momentum should pause or ease in the first half of 2012, according to ANZ Macro Strategy Team: "The rebalancing of growth in China, which is reportedly already underway, also suggests some slowing, although a repeat of the disappointingly deep slow down of 2011 is not expected, but a temporary pause in the manufacturing cycle appears possible."

The Australian Dollar, battered against the US Dollar recently, should base now above the 1.0300 level in the event of a modest slowdown in global economies, note Tim Riddell and Andrew Salter, Head of Golbal Market Research and FX strategist at ANZ. In this environment the Australian dollar's appreciation would slow. The question concerning markets is where will it base in the near term?

"Given the correlation with indicators of the industrial cycle, we might expect it to ease as far as US1.0350 on a monthly average basis if the slow down is modest, as we expect. If it is a slowdown of the kind witnessed in 2011, or one centered more specifically in China, and the AUD experiences a somewhat deeper correction, technical indicators suggest that a re-test of long-term support above USD0.98 would ensue" the analysts observe.

The analysts conclude: "Looking further ahead we are optimistic that the currency will see levels of USD1.10 in the medium term. The high level of commodity price, the wide interest rate available to offshore investors, and the notable changes occurring in developed economies with regards to expanding money supplies and changing credit ratings will all conspire to see the currency strong over the medium term."