Sell AUDUSD: Patience will be rewarded - BNPP

Analysts at BNP Paribas have initiated two short AUDUSD trade recommendations: through cash (targeting 0.74) and through buying the 9m risk-reversal which currently trades at 8-year levels of cheapness.

Key Quotes

“AUDUSD has rallied to post US-election highs above 0.77 and this has corresponded with a build-up in long AUD positioning to a score of +31 (on our scale of -/+ 50), which represents the most extreme level since 2012. The likely to be the catalysts for AUDUSD to correct lower are the market increasing pricing for Fed tightening or a correction lower in risky asset prices which have started to look rich according to our measures which are indicating that the compensation for investors taking risk is very low.”

“Speaking on Friday, RBA Governor Lowe said he thinks commodity prices are going to “come back off again” and that he did not expect iron ore to stay around 90 dollars. We also remain short NZDJPY targeting 78.60.”