This comes via eFX.
ANZ recommends selling AUD/CAD, expecting the pair to weaken due to AUD's greater sensitivity to risk sentiment and trade dislocations, while the negative CAD narrative is already priced in.
Key Points:
AUD Weakness:
- Trade Risks: Ongoing US-China trade tensions disproportionately impact AUD due to its higher exposure to global risk sentiment.
- Risk Sentiment Sensitivity: AUD remains vulnerable to geopolitical and economic uncertainties, making it a preferred short candidate.
CAD Stability:
- Negative Sentiment Priced In: CAD's recent underperformance is largely reflected in its current valuation.
- Less Sensitivity to Trade: CAD’s fundamentals appear more resilient in the face of global trade disruptions compared to AUD.
Trade Setup:
- Entry Level: Sell AUD/CAD from around 0.91
- Target: 0.86
Conclusion:
ANZ expects AUD/CAD to decline as trade disruptions and risk-off sentiment weigh more heavily on AUD than CAD. Selling from 0.91 with a target of 0.86 provides an attractive risk-reward setup.
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