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Stay short AUDUSD into the Fed with target of 0.7000 - BNPP

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 14, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at BNP Paribas, suggests that their top G10 FX trade heading into the meeting is short AUDUSD (target 0.7000), which they expect to benefit both from broad USD strength and from periods of market stress which can hurt the USD vs. lower yielding currencies.

    Key Quotes

    “With USD long positioning very light accordingly to BNP Paribas Positioning Analysis , we see scope for the USD to strengthen broadly in the aftermath of a likely 25bp rate hike on Wednesday, even if the Fed does emphasize gradual tightening going forward as we expect they will.”

    “Our Interest Rate strategy team view that the US treasury market is poised for a substantial sell-off, noting that the 2y yield could rise by more than 50bp (from 90bp currently).”

    “On Friday, reports indicating that the PBOC intends to move towards a currency basket framework for managing the CNY appeared to add to market uncertainty and pressures on the USD. Over time, we think a CNY that tracks a basket of currencies will make the Fed more cautious about exchange rate effects as it moves through its rate hike process next year. However, while this should be a factor limiting the USD’s potential upside over time it should not drive sustained weakness from current levels.”
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