The latest from Credit Agricole: expects the AUD to start bottoming out, in particular against the EUR

Citing:

  • Expect US yields to remain well supported by US growth prospects improving further
  • Therefore Fed monetary policy expectations adjusting higher
  • Do not expect the damage to the AUD from higher US yields to be too great
  • The EUR is unlikely to appreciate further from current levels
  • The ECB is unlikely to turn less dovish, as structural issues will keep growth prospects muted, irrespective of improving global growth prospects
  • The ECB is likely to react to tightening monetary conditions via additional liquidity measures or/and by lowering interest rates further
  • This suggests there is scope for diverging ECB-RBA monetary policy expectations to the detriment of EUR/AUD, while elevated short positioning limits downside risk

Therefore CA enters into a structural short EUR/AUD position at 1.5115. The trade has a target at 1.3425, a stop loss at 1.5960, and a notional size of $10 million.

No, I don’t know what a “structural” short is either. Sounds impressive, though. Better than calling it a punt I suppose.

Via eFx