Morgan Stanley says they have turned bearish on AUD/USD, recommend short positions


Morgan Stanley Research says they have turned to a bearish view on the Australian dollar. 

  • We turn bearish on AUD/USD outright and recommend short positions as we believe the USD rally is starting to broaden out now that we are likely entering Regime 3 of our four-regime USD framework. 
  • AUD/USD is likely to fall in Regime 3 regardless of whether equities rise or fall, though its declines would be more pronounced in a risk-off environment
  • We think hawkish expectations for the July RBA meeting (a top-up in QE but a failure to roll the YCC bond) is increasingly in the price, suggesting risk/reward is increasingly favouring a dovish outcome, not a hawkish one

I am not up to speed on MS’ regime USD framework. Sounds impressive though. 

The Reserve Bank of Australia meeting is on July 6.

Articles You May Like

Falling Yields Drive Euro and Sterling Down
US Dollar closes a third consecutive losing week, focus shifts to employment data
Mexican Peso surges against the US Dollar despite Powell’s pushback
Forexlive Americas FX news wrap: No pushback from Powell, gold hits a record
Learn with ETMarkets: Predicting gold’s future: Insights from past trends