Citi: TOTW…Trade Idea: Sell AUDUSD 0.7054, target 0.6875, stop 0.7150: FXWW

From the FXWW Chatroom – Follow through from the rise in US yields is likely to fuel USD appreciation: The rise in long-term yields is likely to be associated with higher volatility and pressure on emerging markets. This may see USD-positive position cutting by long-term investors. Following the recent flush-out, USD long positioning among short-term investors is far from stretched and increased participation in buying could add to USD upside.
China’s RRR cut does not appear to have stabilized sentiment: Liquidity has tightened in the wake of the move, equities are lower and CNY remains under pressure. Amid rising global yields, this suggests that the bar to improvement in sentiment may now be higher and any further currency depreciation could send a direct signal for a higher USD. AUD may be acutely vulnerable given its status as a regional proxy. We see little on the horizon in terms of domestic events which look likely to offset the impact of worsening in the external backdrop.

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