BNP: Room for further AUD weakness as capex disappoints

From the FXWW Chatroom: Australia private capital expenditure data surprised to the downside, contracting in Q4 by 2.1% q/q (vs 0.5% contraction expected). BNP Paribas FX Positioning Analysis signals long AUD is a heavily owned position by FX investors, with a score of +32 (on our scale of -/+ 50) which represents the largest exposure in AUD since 2012. Therefore, the currency is becoming increasingly vulnerable to correct lower in response to a weaker domestic story or a worsening of the risk environment globally. In their weekly BNP Paribas Markets Call, our cross-asset strategy team notes that a number of the indicators they track are now at levels suggesting the potential of a correction lower in risky assets, making short positions on G10 commodity exporter currencies attractive. We remain in our short NZDJPY trade recommendation targeting a move down to 78.60.

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