Morgan Stanley on the Australian dollar (from their weekly 'Pulse' report)
Note that the trade is dated September 28, but the level is not too much changed so I though I'd post it up (its taken me a while to get around to checking out the Pulse).
Limit Order (28-Sep-17)
- Entry: NY Close 28-Sep-17;
- Target: 0.7500;
- Stop: 0.7960
The rates market have priced in two RBA hikes for the next 12 months which we find to be overly aggressive given highly levered Australian households and weak medium and long-term fundamentals.
- We think it is worth fading against this breakout in Aussie rates and should result in a weaker AUD, if our view is correct.
- The AUD remains vulnerable to lower commodity prices, weaker data of China and higher rates in general.
- We think the Aussie rate should outperform relative to US leading the AUD/USD cross to fall.
- The risks to this trade come from continued strength in domestic data, a rebound in commodity prices and wider AUD/USD rate differentials
(Oh, and re the Citi reference in the post headline: Sell the Australian dollar this week - Citi)
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And don't forget - there is an Reserve Bank of Australia announcement today:
- RBA October monetary policy decision and statement due Tuesday - previews
- Reserve Bank of Australia announcement/statement today - preview
