The BofA-Merrill Lynch Team, suggests going short on AUD/USD and explains the factors that’ll lead AUD to weaken in days ahead.
Key Quotes
“Despite the discouraging price action and upcoming event risk (employment report and RBA Governor’s testimony), we think the medium-term rationale for our recommended short AUD/USD trade remains compelling.”
“Lower commodity prices and deterioration in vol-adjusted carry have fueled the recent drop in AUD. But Australia's balance of payments reckoning for 2015 has yet to transpire and based on the RBA’s communication, policy divergence will likely remain negative vs the USD, where tightening seems imminent.”
“Moreover, we believe the RBA will not dial down its concern around currency strength and risk undoing the "hard-fought" depreciation that has been achieved over the past few months.”
“The risk of sizeable CNY depreciation adds to our bearish conviction on the AUD.”
“We stay short AUD/USD (target at 0.72 and "in-the-money" stop at 0.80) and recommend selling any rallies above 0.80.”
Key Quotes
“Despite the discouraging price action and upcoming event risk (employment report and RBA Governor’s testimony), we think the medium-term rationale for our recommended short AUD/USD trade remains compelling.”
“Lower commodity prices and deterioration in vol-adjusted carry have fueled the recent drop in AUD. But Australia's balance of payments reckoning for 2015 has yet to transpire and based on the RBA’s communication, policy divergence will likely remain negative vs the USD, where tightening seems imminent.”
“Moreover, we believe the RBA will not dial down its concern around currency strength and risk undoing the "hard-fought" depreciation that has been achieved over the past few months.”
“The risk of sizeable CNY depreciation adds to our bearish conviction on the AUD.”
“We stay short AUD/USD (target at 0.72 and "in-the-money" stop at 0.80) and recommend selling any rallies above 0.80.”
