Synopsis:

ANZ highlights the seasonal trend of AUD/USD underperformance in August due to increased volatility. However, they maintain a positive medium-term outlook, projecting the pair to end the year at 0.69.

Key Points:

1. Seasonal Trends:

   • August Underperformance: Historically, AUD/USD tends to underperform in August due to a rise in market volatility.

2. Near-Term Outlook:

   • Two-Way Risk: The pair is expected to exhibit two-way risk and likely trade within a range of 0.64–0.66 in the near term.
   • Support Level: Net buying activity has rebounded, suggesting that 0.65 will act as a near-term support for AUD/USD.

3. Medium-Term Outlook:

   • Higher-for-Longer RBA: ANZ anticipates the Reserve Bank of Australia (RBA) will maintain higher rates for longer compared to other central banks, supporting the AUD.
   • Structural Drivers: Relatively stronger structural factors in Australia compared to New Zealand and the euro area are expected to support the AUD.
   • Year-End Seasonality: Positive seasonality towards the year-end is projected to drive AUD/USD to end the year at 0.69.

4. Observed Spot Flows:

   • Net Buying Trends: Observed spot flows showed a sharp decline in net buying from mid-July due to soured risk sentiment. However, a rebound in net buying indicates resilience around the 0.65 level.

Conclusion:

While ANZ expects seasonal underperformance for AUD/USD in August, with the pair trading within a 0.64–0.66 range, they maintain a bullish medium-term outlook. Factors such as a higher-for-longer RBA policy stance, stronger structural drivers, and favorable year-end seasonality are expected to push AUD/USD to 0.69 by the end of the year.