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Analysts at Nomura explained that FX market participants’ AUD positioning is heavily net-short and look to an AUD/USD long position.

Key quotes:

“Combining asset manager and leveraged fund positions shows AUD net-short positioning at 52% of outstanding contracts, near its lowest levels since 2015. Negative China sentiment and trade war concerns have likely driven this bearish positioning. As discussed above, these themes can unwind somewhat in the weeks ahead.”

“Furthermore, the recent stabilisation in EM currencies will also likely support AUD, which remains sensitive to global risk appetite.”

“Positioning in CAD is still bearish, but only 15% of outstanding contracts are net-short. AUD-CAD positioning is near its recent lows. We enter a long AUD/CAD positions at 0.9412, targeting a bounce to 0.97 in the coming months, where we will reassess the position. We set a stop near recent lows of 0.9250.”