Traders favour AUD longs ahead of the RBA

Australia is the place to be today with investors and traders keeping a keen eye on the RBA and its call on rates.

Source: Bloomberg

I think the pros and cons have been well documented by now, so the interesting bit is now more on positioning ahead of the meeting. While the swaps market is pointing to a 58% probability of a cut, 48% of our clients are short AUD/USD with the majority favouring longs at the moment.

There are two schools of thought. It could be a ‘sell the rumour and buy the fact approach’, which would see AUD/USD rally post the meeting. On the other hand, if the RBA disappoints in any way, it will lead to a reversal of magnitude and some traders will be looking to take advantage of that.

As a result, there are two plays here. Traders looking to ride the near-term momentum could target levels around $0.8000. In that region, sellers could be looking to come back in and I still feel in the medium term the AUD is a short.

Alternatively, if traders who are long at the moment got this trade wrong, then momentum plays on a break of recent lows could be the trade. Remember AUD/USD traded as low as $0.7720 and that’ll act as near-term support.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.