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AUD: AUD on Cusp of Resuming Downtrend, But Downside Could be Priced In

AUD
RegionGlobalBulletAPACForeign Exchange BulletsAustraliaMarkets
  • AUD/USD sliding alongside the broader USD intraday strength, helping the pair narrow the gap with support at 0.6702 and the 100-dma of 0.6694. Clearance below here would resume the primary downtrend drawn off the late September highs, and soft China data (slower imports & exports, softer-than-expected CPI) may be compounding concerns raised in the light-on-details media briefing from the Chinese Ministry of Finance.
  • Nonetheless, near-term momentum in positioning has improved and weakness in xxx/AUD crosses could shield the pair from further sharp losses. EUR/AUD will print a death cross at today's close (50-dma < 200-dma), signalling S/T downside momentum in the price.
  • We have written in recent weeks on the AUD/USD rally to 0.6942 being driven by aggressive short-covering, and Friday's CFTC report provided further confirmation, as the deep net short swings to a net long of 33k contracts - the largest since 2017. This tips the positioning 52w Z-score for AUD to the highest among G10, a trend that could support a buy-on-dips strategy in the near-term.
  • Thursday's AUD jobs print may provide the next hurdle to pricing (markets price less than 50% odds of a 25bps cut by year-end), and the unemployment rate is expected unchanged at 4.2%. AUD spot is currently undershooting consensus for AUD/USD at 0.69 for end-Q4.
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  • AUD/USD sliding alongside the broader USD intraday strength, helping the pair narrow the gap with support at 0.6702 and the 100-dma of 0.6694. Clearance below here would resume the primary downtrend drawn off the late September highs, and soft China data (slower imports & exports, softer-than-expected CPI) may be compounding concerns raised in the light-on-details media briefing from the Chinese Ministry of Finance.
  • Nonetheless, near-term momentum in positioning has improved and weakness in xxx/AUD crosses could shield the pair from further sharp losses. EUR/AUD will print a death cross at today's close (50-dma < 200-dma), signalling S/T downside momentum in the price.
  • We have written in recent weeks on the AUD/USD rally to 0.6942 being driven by aggressive short-covering, and Friday's CFTC report provided further confirmation, as the deep net short swings to a net long of 33k contracts - the largest since 2017. This tips the positioning 52w Z-score for AUD to the highest among G10, a trend that could support a buy-on-dips strategy in the near-term.
  • Thursday's AUD jobs print may provide the next hurdle to pricing (markets price less than 50% odds of a 25bps cut by year-end), and the unemployment rate is expected unchanged at 4.2%. AUD spot is currently undershooting consensus for AUD/USD at 0.69 for end-Q4.