Forex Flash: AUD/USD looks to rebound after last week – NAB

FXstreet.com (Barcelona) - Just when the AUDUSD was starting to have the look and feel of 1.0500-1.0600 about it, the pair was roiled by a downside range break towards the end of last week. Indeed, in the past week the AUD has, with the exception of the yen, been the worst performing G10 currency.

The AUD/EUR related sales are a large part of the story as the EUR benefits from the ongoing re-rating of the risks inherent in holding financial assets in the single currency and with the larger than expected repayment of the ECB's LTRO largesse the latest indication of diminishing Eurozone tail risk. According to the NAB Analyst Team, "We have suggested that one of the single biggest risks to the currency in the coming weeks relates to US fiscal and debt ceiling developments and which were seen as having the potential to provoke a mini re-run of the events of August 2011. Back then, in the wake of the lifting of the US debt ceiling without any meaningful fiscal accord and the subsequent S&P downgrade to the US' credit rating, AUDUSD fell by over 10 cents in under two weeks."

Now, "given signs that the debt ceiling issue is about to be kicked a (few more months down the road, such that the risk of a late February/early March repeat of the2011 toxic cocktail of developments in Washington is much diminished, this looks to have minimized one source of downside risk for the AUD, in Q1 at least."