This post is a response to a question in the comments today:
Everyone and their dog are short AUD/USD but bottom might be near, what do you guys think?
OK ...
Is Everyone and his dog short AUD/USD?
The short AUD trade has gained in popularity in recent days and weeks, and shorts have increased.
From ANZ's (Senior FX Strategist Irene Chung) look at the latest CFTC data:
For commodity currencies, leveraged funds
further raised their net shorts in AUD by
another USD0.3bn to USD3.4bn, the highest
in 13 weeks
So, yeah ... shorts are definitely building
OK ...
So, can the AUD fall further or is the bottom near? What are the influences?
Negatives for the AUD:
Export commodity prices are weak
Federal Reserve rate hike coming up ("When?" is one question, market consensus is centred on September at present. "What will the path be for further hikes?' is the next question. We may learn more from the FOMC meeting concluding on Wednesday). Not only will this make the AUD less attractive relative to the USD, but it will likely also see an increase in market volatility & accompanying heightened risk aversion which is a negative for the AUD
Expectations of further RBA easing ... though the RBA would seem to be on hold for coming months
There are more, feel free to add them in the comments
Positives for the AUD
Demand for higher yield ... i.e. Australian debt vs. low to negative rates in the US (see Fed comments above, though), Japan, Europe ... and more. Japanese interest in/demand for Aussie bonds remians high
Expectations of further RBA easing ... the RBA would seem to be on hold for coming months ... and the next move may well be a hike (I'll have more on this coming up)
What about the technical?
Well .... IMHO the techs on the AUD look like ... well, this is a family website so I can't say what I really think (****in' ****) ... but they don't look positive to me:
So, the short answer to the question is for me, there is plenty of room for the AUD lower ....
