Richard Franulovich, Research Analyst at Westpac, suggests that the markets have been leaning toward a more risk averse tone in recent days. Key Quotes “There are some key differences between the current skittish backdrop and that which pervaded in Jan-Feb 2016, as well as some key event risk on the horizon, all of which suggests that any risk aversion in coming weeks should leave fewer scars than earlier this year. Short AUD/CAD and NZD/CAD appear ideal for navigating these risks. These two crosses have a lower beta with respect to risk appetite than other currency pairs and should be somewhat insulated from any misreading of the earlier risk positive events. More importantly, there seems to be a subtle shift underway in growth, policy and terms of trade differentials back in Canada’s favour. On balance the background to this latest burst of risk aversion is less worrisome than the Jan-Feb spike in risk premiums. Upcoming event risk is more likely than not to short-circuit a deeper risk aversion move. Short AUD/CAD and NZD/CAD appear ideal for navigating these risks. AUD/CAD is at the higher end of its two-year range and offers better location for shorts than NZD/CAD, the latter closer to the middle of a larger 0.80-0.95 range. A run to the bottom of these larger two-year ranges in coming months implies 6-7% downside in both pairs.” For more information, read our latest forex news.