According to Kristoffer Lomholt, Analyst at Danske Bank, potential pullbacks in Aussie dollar should be somewhat limited. Key Quotes “Fundamentally, we still expect the ‘aussie’ terms of trade chock to weigh on the AUD/USD over the coming year. With the recent repricing of Fed monetary policy, we also see scope for higher US rates dragging the cross lower over the coming 12M”. “However, we think a range of factors significantly limits the downside potential: (1) long-term fundamentals suggest AUD/USD is no longer overvalued”. “(2) market pricing of future RBA monetary policy is aggressive (we expect RBA to keep rates unchanged over the coming 12M)”. “(3) China stabilisation and (4) close to historically stretched short AUD speculative positioning. For more information, read our latest forex news.