The local currency is a great indicator of the global economy, its regarded by most market participants as a proxy for economic growth similar to Copper. The chart below illustrates how since last March the “Aussie” has already rallied 45%, reaching levels way above when the coronavirus was even discussed. When the $A was around 80c we moved to short-term bearish stance targeting a 4-5c correction, this has now been achieved moving us to a mildly bullish stance and at this stage we believe the $A will rotate between 75 and 82c through 2021.
If our view on the $A proves correct it implies that markets will re-embrace the recovery thematic in the months ahead but its going to take a while before financial markets are convinced the economic cycle is on an ever upward trajectory.
MM is neutral to positive the $A below 76c.
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