The Head of Research at MUFG According to Derek Halpenny, the RBA's recent rate hike has helped the Australian dollar maintain its position as the top G10 performer in February, but speculative long posture has reached its limit. MUFG's Z-Score indicates record over-extension, and leveraged funds' AUD longs are at their highest level since 2017. These factors point to an increasing possibility of a short-term AUD/USD correction before a possible medium-term move higher.
The AUD/USD decline is indicated by stretched longs.
"The positioning data provided last Friday definitely hint to more restricted opportunity for future gains at current more elevated AUD levels, and the Australian dollar has dipped marginally today (mostly due to overall increased risk aversion)."
"Leveraged Funds' long AUD positions increased further to close to 65k, the highest total AUD long position since October 2017, according to positioning data posted on Friday through Tuesday of last week."
"The degree of over-stretched positioning is measured by our proprietary Z-Score indicator, which is based on the average of two years' worth of data and is currently at a record in the data series dating back to 2006."
"The risk-reward at current levels is obviously starting to look a little less appealing given the RBA attitude now looks much better priced."
The underlying backdrop is favorable beyond the short term, so any reversal lower in the AUD would only be a short-term dynamic. A clear-out of positioning would be the perfect chance to reenter for a medium-term advance higher.
The AUD/USD decline is indicated by stretched longs.
"The positioning data provided last Friday definitely hint to more restricted opportunity for future gains at current more elevated AUD levels, and the Australian dollar has dipped marginally today (mostly due to overall increased risk aversion)."
"Leveraged Funds' long AUD positions increased further to close to 65k, the highest total AUD long position since October 2017, according to positioning data posted on Friday through Tuesday of last week."
"The degree of over-stretched positioning is measured by our proprietary Z-Score indicator, which is based on the average of two years' worth of data and is currently at a record in the data series dating back to 2006."
"The risk-reward at current levels is obviously starting to look a little less appealing given the RBA attitude now looks much better priced."
The underlying backdrop is favorable beyond the short term, so any reversal lower in the AUD would only be a short-term dynamic. A clear-out of positioning would be the perfect chance to reenter for a medium-term advance higher.
