Morgan Stanley: Wee see AUD/USD on 0.6500. Where to sell?

According to Morgan Stanley, AUD will drop to levels after the financial crisis in 2008-2009 as it loses its position as a high-yielding currency. The Australian is likely to fall to 65 US cents in 2019 as yields on bonds in the country will ultimately be lower than that of the Federal Reserve, said Hans Redeker, chief global currency strategist at Morgan Stanley.

While Australian earnings decline, its correlation with emerging markets will continue to decline, and this in turn will eliminate the beneficial impact of developing countries on the Australian.

In the past, investors were buying an Australian for every good news that affected emerging markets, but that would not work in the coming months, Redeker said. Looking at the Bloomberg Pro Terminal, it is clear that the correlation between the Australian and emerging markets is moving in a downward trend, currently at the top of the channel at levels of 0.42, dropping sharply from the last peak at 0.55.

What do these numbers mean? Briefly, the correlation of the Australian to the emerging markets of 0.42 means that if the emerging markets make a 1% growth, the Australian will jump by 0.42%.

Technically, such long-term forecasts should be viewed on a monthly schedule. Looking at the graph, it is clear that AUD / USD has adjusted to extremely cardinal levels, where we have a total of 38.2% Fibonacci correction, 50SMA and 200SMA as 50 crosses 200 down and horizontal resistance levels. During the fix, we also have a flag formation that is still inactive. It is with the flag activation that we can position ourselves with new short positions with SL over 23.6%. Supporting the short idea is also RSI(14), which runs below 50, and this signals the possibility of a new downward wave.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

Read more:

• FOREX: Bulls on EURUSD with sight for 1.1300; Основни подкрепи и съпротиви 16.05.2019
• How to trade the AUDJPY breakout
• AUDNZD multiple signals that the bottom is close
• AUD at key technical levels, but the data for China weighs on the fundament
• Crédit Agricole with Long recommendation of AUD/NZD – SL: 1.0590 – TP: 1.1050