I’m not crazy about this idea but Citi says investors following tactical strategies should consider selling AUD/USD this week targeting a decline beneath recent lows close to 0.80, in its weekly FX pick to clients.
“Positioning points to attractive risk-return in shorts. Our flows data shows that both leveraged and real money investors have been buyers of AUD into recent weakness. The latter may represent longer-term investors hunting for value given relatively high yields and credit standing in Australia, but this sector should be less likely to chase any spot move higher,” Citi says as a rationale behind this call.
“Similarly, following recent buying shorter-term investors risk for a short squeeze may be limited. Indeed, there may be more pain on a spot decline that threatens recent lows,” Citi adds.
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