AUDUSD is looking overdone: Time to go short - BNPP

Research Team at BNP Paribas, suggests that they have initated a  short AUDUSD trade recommendation via a 3-month AUDUSD Seagull: Buy 0.7325 Put, Sell 0.7950 Call, Buy 0.8200 Call.

Key Quotes

“The AUDUSD rally appears perplexing in light of the RBA’s recent rate cut. However, our BNP Paribas short-term equilibrium exchange rate or STEER™ model signals that the rally is strongly linked to the rally in equities rather than relative rates.

As markets price in a greater chance of Fed tightening at the September meeting, risk sentiment and equities may come under pressure which would be negative for the AUD. We stress that Fed Chair Janet Yellen’s speech at Jackson Hole on 26 August may be a catalyst for the market to reprice Fed rate-hike expectations. Accordingly, we believe that relatively cheap options on AUDUSD may provide a first step to position for an AUD pullback.”