FxWirePro: Aussie Bearish/Bullish Scenarios and Relative Values Trades of AUD Crosses

Foreseen AUDUSD bearish scenarios below 0.68 given: 

1) The Aussie unemployment rate moves back towards 5.75%, raising 

the spectre of RBA rate cuts; 

2) The Fed responds to firm labour market outcomes and above trend growth by delivering a faster pace of hikes than currently expected; 

3) China has been a prime trade partner of Australia; Chinese data weaken materially; or 

4) Risk markets retrace and vol rises as trade war fears escalate.

Bullish AUDUSD scenarios are foreseen above 0.74 given: 

1) China eases policy and commodities rebound; 

2) The Fed’s tightening timeline is disrupted by further downside surprises on inflation; or 

3) The RBA adopts a more hawkish tone to its communications. 

Trade Recommendations:

Contemplating all factors of the underlying pair (AUDUSD) as explained above, we advocate quite a few relative value trades that is a fundamental factor that could be utilized to assist identify potential trading opportunities in fx markets capitalizing on potential divergence between each other FX pairs.

Buy 9M 40D (7.12 strike) USD calls/CNH puts vs. sell 9M 4.60-5.20 AUDCNH Strangle 0 bp CNH. The revised bearish CNY targets for 2019 are less than 1/3rdlikely according to prices of digital USD calls/CNY puts. Position for medium-term RMB weakness by buying 9M USD calls/CNH puts financed costlessly by shorting 9M AUDCNH strangles. 


Short 3M 25D AUDUSD puts vs add longs in 6M 25D AUDUSD calls, ultimately, delta-hedged.

EURKRW - EURAUD ─ Buy EURKRW vs EURAUD 3M vol spread. Courtesy: JPM

Currency Strength Index: FxWirePro's hourly AUD spot index is inching towards 94 levels which is bullish), while hourly USD spot index was at -68 (bearish), while articulating (at 08:09 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex