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Jan 17 - 10:55 AM

ANZ: AUD/USD Outlook for the Week Ahead

By eFXdata  —  Jan 17 - 10:15 AM

Synopsis:

ANZ maintains a neutral-to-negative stance on AUD/USD, with short-term risks skewed toward further downside, potentially below 0.613. Sustained USD strength, weak risk sentiment, and local economic data weigh on the pair, while shallow RBA easing expectations may provide limited medium-term support.

Key Points:

  • Current Performance and Drivers:

    • AUD/USD has reached a five-year low near 0.613 due to firm USD tailwinds and declining risk sentiment.
    • Recent rebounds, following US CPI data, remain unsustainable without a significant deterioration in risk appetite (ANZ's threshold: sentiment index below -2).
  • Market Sentiment and Flows:

    • Spot flows for AUD/USD have been volatile, with significant net selling post-December FOMC.
    • Rebounds into overbought territory signal heightened risk of short-term downside.
  • Local and RBA Developments:

    • Softer trimmed mean CPI data (3.2% y/y) raises the likelihood of a soft Q4 CPI print on January 29.
    • ANZ expects the RBA to cut rates by 25bp in February and August 2025, maintaining a shallow easing cycle.
    • Favorable rate differentials against EUR and JPY could offer modest AUD/USD support in the medium term.

Conclusion:

ANZ is neutral to negative on AUD/USD in the short term, citing sustained USD strength and weak risk sentiment. While the RBA’s shallow easing outlook may offer some medium-term support, near-term dynamics favor further downside, with a potential drop below 0.613.

Source:
ANZ Research/Market Commentary

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