AUD/USD — At A Premium Based On Potential Central Bank Divergenc

If it wasn’t for the lingering positive effects that the US-China trade talk negotiations have engineered in the price of beta currencies the likes of the Aussie, which also finds its backing from broad-based USD weakness, one would think the pricing of the pair is at an attractive level to short. Especially if you buy into the idea that the RBA may revise down its outlook for the economy and eventually cut interest rates to lessen the debt burden by household and stimulate consumption. However, the price action and correlated instruments (SP500, Yuan, DXY) all show this is not the time to be a hero by shorting the Aussie. Re-assessing the picture post FOMC will be a positive exercise of patience. Besides, AUD outlook has been clouded by its deteriorating fundamentals, while the USD is one of the weakest currencies in the last week, hence the combination of currencies does not seem to be the best to exploit market movements in the next 24h. Throw into the mix the unpredictability of the US-China trade talks this week, and I’d say this is a high-risk pair to get involved this week.