Goldman Sachs advises investors to take a short position on the EUR/AUD currency pair, projecting a beneficial shift due to anticipated movements in risk assets and the upcoming Reserve Bank of Australia (RBA) policy meeting.
Risk Assets and Real Rates: Goldman Sachs predicts a tactical turnaround in risk assets along with a decrease in real rates as the year draws to a close, which could impact currency valuations favorably for their suggested position.
RBA Policy Meeting Expectations: A rate hike by the RBA is anticipated, which is expected to support the Australian Dollar (AUD) slightly. Such a move would generally bolster the appeal of the AUD on interest differential grounds.
Central Bank Policies: Although central banks globally are contemplating further rate hikes or maintaining the possibility of hikes, the impact on currency pairs may be muted, given that these actions are widely anticipated by the markets.
Trading Strategy: Goldman Sachs sets a specific target and stop for the short position:
- Target: 1.62, indicating an expectation that the AUD will strengthen against the EUR to this level.
- Stop: 1.67, suggesting a limit to the potential loss from the trade should the market move in the opposite direction than expected.
Goldman Sachs' recommendation for a short position on EUR/AUD is based on the forecast of a favorable environment characterized by stronger equity prices and lower real rates, alongside an RBA rate hike. The targeted levels provide a clear strategy for investors, with the stop-loss set to manage risk. It's important to note that such recommendations are based on current market conditions and expectations, and the actual market behavior could vary depending on numerous factors including unforeseen economic developments and shifts in investor sentiment.