A trade idea from RBC for the week
Long AUD/USD position established at 0.7920
- Target 0.8080
- Stop 0.7850
RBC cite (in brief):
- Expect Friday's fall in AUD to ultimately be a buying opportunity
- Expect another test of 0.80 in AUD/USD is likely in the coming days
- Debelle's comments suggest there is little prospect of higher rates in the foreseeable future, but markets are already priced for this
- In any case, the positive case we see for AUD is driven more by appetite for outright yield than interest rate dynamics
- With VIX hitting a new 25 year low on Friday and markets still risk-seeking, buyers of dips in AUD should be quick to emerge
- We see some upside risks to the Australian Q2 CPI, due Wednesday
- Expect month-end flow to increasingly be the focus as the week progresses and, unless equities have a material correction lower, our model will be broadly short USD and long AUD on expected equity hedging flow
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RBC say on their "Thematic Trade of the Week"
- Short-term FX trade
- Trades have maximum duration of one week - closed as the next is released assuming the stop or trade profit levels have not traded
- Trades are G10 only
- Directional spot positions in a single currency pair (ie no options or basket trades)