TD Securities analysts Prashant Newnaha and Howard Du report that the Australian Dollar (AUD) has achieved its strongest year-to-date performance in 15 years. However, they now anticipate limited upside for the AUD for the remainder of the year, citing a series of weak Australian data releases in May that have already pushed the AUD/USD exchange rate down from 0.72 to 0.70 [1].
The analysts recommend expressing a bearish view on the AUD, particularly through lower AUD/CAD positions, due to stronger Canadian economic data compared to Australia. They also maintain a short-dated 1.18/1.2050/1.23 AUD/NZD fly, as weak Australian data and hawkish guidance from the Reserve Bank of New Zealand (RBNZ) are seen as capping gains in the AUD/NZD cross [1].
TD Securities' preference for bearish AUD strategies is based on diverging economic data between Australia and its trading partners, as well as central bank policy differences. The firm notes that the recent slew of weak Australian data has already impacted the currency, and they do not foresee significant upside for the AUD in the near term [1].
CONCLUSION
TD Securities highlights that despite the Australian Dollar's strong start to 2024, recent weak data and central bank divergence suggest limited further gains. The firm recommends bearish AUD strategies, particularly against the Canadian and New Zealand dollars, reflecting a cautious outlook for the currency.