Morgan Stanley suggests selling AUD/JPY at spot
In their trade of the week report, Morgan Stanley analysts suggest AUD/JPY shorts at 85.75 (spot at 85.70) with a target of 82.00.
"With risk appetite declining and a range of risk events at year-end that could trigger China's December Caixin PMI eased to 48.2 from 48.6. It has stayed below 50 since April, suggesting the contraction of China's manufacturing sector to increase from here.
China's People's Daily runs an article stating that "traditional Keynes theory has its limits", urging structural reform. Weakness in the non-oil commodity sector combined with increasing RMB depreciation would not bode well for the AUD," MS says as a rationale behind this call.
To me, that's a tough trade to jump on after the pair already fell 230 pips today. I can see a better case for selling it on a bounce to 86.30.
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