AUD/USD: Doubts about the rally, at least short-term

The Australian dollar made a big breakout on RBA comments, but the same institution tried playing it down. What’s next?

Here is their view, courtesy of eFXnews:

AUD/USD: S/T Correction Likely On Position-Squaring Risk & RBA Comments – Credit Agricole

Credit Agricole CIB FX Strategy Research argues that  AUD/USD is likely vulnerable to a short-term correction on elevated long positioning and more cautious comments from the RBA.

“With the AUD having appreciated considerably during the last few weeks it cannot be excluded that central bank members will turn more cautious on the currency. In fact, Deputy Governor Debelle already stressed that a stronger currency is not welcomed

In addition elevated long positioning should have increased position squaring related downside risks,” CAICIB notes.

CACIB still targets AUD/USD at 0.75 by the end of Q3.  

AUD/USD: Rally Still On Shaky Foundation; What’s The Trade? – Nomura

Nomura FX Strategy Research notes that AUD/USD has touched a multi-year high before correcting slightly lower but market participants are seemingly willing it to break higher again.

“From a fundamental perspective,  we remain of the view that the rally in the AUD/USD is on shaky foundations, and the market looks to be pricing in too much positivity on the AUD side and across broader risk markets,” Nomura argues.

“Rather than lean against the current move in spot, which is susceptible to a further near-term squeeze higher, we thinkoptions is preferable,” Nomura advises.

Nomura recommends short AUD  via an AUD/USD 2m 0.7670/0.7530 put spread.

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