The Australian dollar has been range-bound against the greenback for quite some time. The team at Credit Suisse sees a sell opportunity, and they explain:
Here is their view, courtesy of eFXnews:
Currency investors should consider selling AUD/USD this week, advises Credit Suisse in its weekly FX pick to clients.
“Since the start of October, expectations for a November RBA cut have eased back from 28% to just 12%. From current pricing, we see a greater risk that marginal developments in fact surprise the market to the dovish rather the hawkish side (e.g. Australian unemployment data this week, a speech by new Governor Lowe tonight or tomorrow’s RBA minutes).
Given a reliable historical relationship between inflation trends in New Zealand and Australian, a soft New Zealand CPI print tomorrow could dampen expectations for next week’s Australian CPI print too. Markets expect New Zealand CPI to fall from 0.4%qoq in Q2 to just 0.1% in Q3.
AUD appears ‘strong’ through several short-term indicators. AUD has outperformed most G10 currencies against the USD since the start of the month, leaving it potentially exposed to a catchup to the USD strength. AUD TWI has also outperformed iron ore and copper over recent weeks.
China will release September macro data, including IP, retail sales and Q3 GDP later this week. AUDUSD could come into spotlight if this surprises to the soft side; mirroring the theme seen in weak China trade data recently,” CS says as a rationale behind this call.
“The main risk to the trade is that AUDUSD may lack the trigger to weaken without the RBA taking a more dovish tone,” CS adds.
As a technical-based trade, CS runs a limit order to sell AUD/USD at 0.7692, with a target at 0.7510.*
