Currency investors should consider selling AUD/CAD this week, advsies Deutsche Bank in its weekly FX pick to clients.
“AUD/CAD is overvalued given differentials in the terms of trade and short-term rates, as well as global volatility gauges. The recent divergence in speculative positioning in favour of AUD is unusual; historically positioning in the two currencies is strongly cointegrated.
Policy risk should not interfere with correction to fair value. While the RBA is likely confirm its neutral outlook this week, expectations are low going into the meeting,” DB says as a rationale behind this call.
In line with this view, DB recommends selling AUD/CAD from 0.9930, with a target 0.96, and a stop at 1.01.
This article originally appeared at eFXnews.