Synopsis:

ANZ recommends selling AUD/CAD, expecting the pair to weaken due to AUD's greater sensitivity to risk sentiment and trade dislocations, while the negative CAD narrative is already priced in.

Key Points:

AUD Weakness:

• Trade Risks: Ongoing US-China trade tensions disproportionately impact AUD due to its higher exposure to global risk sentiment.
• Risk Sentiment Sensitivity: AUD remains vulnerable to geopolitical and economic uncertainties, making it a preferred short candidate.

CAD Stability:

• Negative Sentiment Priced In: CAD's recent underperformance is largely reflected in its current valuation.
• Less Sensitivity to Trade: CAD’s fundamentals appear more resilient in the face of global trade disruptions compared to AUD.

Trade Setup:

• Entry Level: Sell AUD/CAD from around 0.91
• Target: 0.86

Conclusion:

ANZ expects AUD/CAD to decline as trade disruptions and risk-off sentiment weigh more heavily on AUD than CAD. Selling from 0.91 with a target of 0.86 provides an attractive risk-reward setup.