Aussie, Kiwi and Loonie poised to rally against the euro: Goldman Sachs

Latest data from the US Commodity Futures Trading Commission revealed that traders scale back long positions in currencies, including the Australian, New Zealand and Canadian dollars. Prices have followed suit.

A Goldman Sachs analysis suggests that Aussie, Kiwi and Loonie dropped by 4 percent, 6 percent and 5 percent in trade-weighted terms. Silvia Ardagna and Lorenzo Incoronato, FX strategists at Goldman, said that although they have been under pressure, change is about to start particularly against the high-flying euro.

In a note released this week, Ardagna and Incoronato said that G10 commodity currencies should continue to appreciate in the next 12 months based on recently revised forecasts. That is specifically versus the EUR and the Yen.

The pair cited various catalysts that will back up commodity currencies in the future. These are expectations for very accommodative monetary policy for the rest of 2017, the possibility of a rebound in crude oil prices that will help support commodity currencies and economic strength.

“Among the four commodity currencies, our forecasts imply that the NZD and CAD are likely to see a stronger appreciation than the AUD,” Ardagna and Incoronato wrote. Although the pair perceives more upside for the Kiwi and Loonie, the experts believe all three are likely to rally against the euro, Business Insider notes.

“Tactically, we think the largest upside for the G10 commodity currencies is versus the EUR as the market appears to have moved too fast to price in expectations of a hawkish policy shift from the ECB at the June meeting, given the still weak Euro area inflation outlook,” Ardagna and Incoronato explained. They anticipate the CAD to perform best against the euro in the next 12 months.

They stressed that CAD has been the G10 currency with the highest beta to increases in oil prices. Therefore, currency must reprise the most as the oil price soars higher.

News.com.au reported on Tuesday that the Aussie dollar is solidly higher against the US dollar as the greenback continues to soften. The former was worth 74.75 US cents at 0635 AEST on Tuesday from 74.45 US cents on Monday. The news outlet posted a currency snapshot at 0635 AEST One on Tuesday indicating Australian dollar buys:

* 74.75 US cents, from 74.45 on Monday

* 83.19 Japanese yen, from 82.92 yen

* 66.51 euro cents, from 66.61 euro cents

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