AUD heaviness to extend - RBS

FXStreet (Bali) - Greg Gibbs, FX Trading Strategist at RBS, shares his thoughts on the market, anticipating that the Australian Dollar will stay heavy.

Key Quotes

"The USD starts this week on an unusually firmer footing. The more frequent pattern is weakness as investors appear to return to carry trades after taking some profit into an always uncertain weekend."

"Perhaps the firmer USD reflects recognition of recent improving trend in US data including unemployment claims remaining low last week. US yields firmed late last week, raising its yield advantage against the JPY and EUR and narrowing somewhat the yield advantage of some EM and commodity currencies."

"Japan's trade balance was weaker than expected for a fourth month in a row. Considering this and somewhat higher yields in the US, we see further upside for USD/JPY."

"The market has forecast a decent rise in inflation in Australia this week and this appears plausible in light of recent improvement in activity, although there is much uncertainty and it could significantly alter the rates outlook for the second half of this year. We continue to favour downside in the AUD on our view that the AUD will trade heavily as a proxy for Chinese industrial commodity demand."