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Thomson Reuters
May 16 - 02:36 PM
AUD/USD - COMMENT-AUD/USD Faces Downside Risks But Losses Will Be Hard Fought
First appeared on eFXplus on May 16 - 01:00 PM

AUD/USD fell to a 4-month low below 0.69 after unexpectedly weak Australian jobs data nL4N22S0UZ, but further losses will be slow even though bearish risks are growing. Upbeat U.S. economic data nAQN04EK00 nLNSGGEF41 added to the losses and an article from the Herald Sun's Terry McCrann piled on, saying RBA rate cuts are coming RBAWATCH.
The U.S. data pushed eurodollar EDM0 and fed funds futures prices lower FFM0, reducing odds of a Fed rate cut while also driving Australian-U.S.
spreads wider. Still, commodities could support the aussie.
Oil futures CLv1 have rallied sharply off the 200-DMA while iron-ore futures DCIOc2 hit a fresh 13-month peak.
Options also suggest downside moves will be a grind as AUD 1-month ATM vol is falling again after rallying sharply from April's low.
The sinking vol suggests AUD/USD price action will be limited.
Positioning could also temper bears with the net short in aussie, while recently reduced, remaining elevated .
Profit taking on AUD/USD shorts in place since early 2019 could help slow downside moves.
Bears likely need the RBA to take a sharply dovish stance at their June 4 meeting if they want a quick AUD/USD drop.
For now further falls could come at a snail's pace.

chart: Click here

chart: Click here

Source:
Thomson Reuters IFR Markets

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