The RBA meet on September 06 and there are a number of factors likely to weigh on the AUD going forwards
Firstly, China’s growth is slowing and the AUD tends to rise and fall with China’s economic growth.
Secondly, key export commodities from Australia have seen lower prices. Iron ore, coal, and copper prices have all been tracking lower on global growth slowdown worries.
Thirdly, the veteran economist Saul Eslake sees the RBA abandoning the 50 bps rate hike going forward. He expects unemployment to rise and GDP to miss the RBA’s projections. See here.
So what’s the trade? Well, if the RBA do take a more dovish stance at their upcoming rate meeting then that can be nicely expressed through a AUDNZD short at market.
Also look at the strong seasonals favouring AUDNZD selling with 16 falls between Sep 06 and Sep 19 over the last 22 years the seasonal favour AUDNZD weakness too.
Major Trade Risks:
The major risk here is that the RBA take a more hawkish stance at their upcoming meeting and that can lift the AUD. The other risk is that a turnaround in China’s growth picture and/or commodity prices can nullify this outlook.
Remember, don’t just trade it, Seasonax it!