FxWirePro: Strategical hedging for the Australian exporters as AUD in tepid swings

The downside risk in AUD against USD is anticipated if the Fed's rate decision seems to be is in line with the Yellen's hints after she sent strong indications that US economic conditions are likely to justify an interest rate hike at some point this year.

Agenda on week ahead and global economy:

20^th July: Monetary policy minutes
21^st July: Australian CPI Q2
21^st July: RBA governor Steven's speech
29^th July: Fed's Interest rate decision

Formulation of Strategical Framework:

For Australian exporters who have their receivable exposures in USD, we advocate buying ATM (At The Money) AUDUSD put options.

Keep long positions ATM 0.7404 -0.51 delta put option of August expiry.

Costing maximum funds at risk is US$ 538.06 per lot of 100,000 with a breakeven of around 0.7332.

Bear in mind that we are well above the levels that we've been over the Fed's rate decision which is scheduled on 29^th July. We believe a higher USD gives them more of a case to cut rates. Entry: ATM (At-The-Money), 0.7404

Maximum loss to the extent of premium paid as we are long the put option.

Desired returns would be triggered by expected Fed's 25 bps rate cut.