Forex Investment and Currency Trading

Global rate markets are moving in a manner that suggests growing confidence in decoupling global growth prospects. While this confidence may ultimately prove misplaced, history suggests running with it for several months, if not quarters.  Long AUD/CAD is the key way to play this theme, whilst at the same time reducing USD risk and reducing commodity price risk. Buy on an upside break of the recent range around 0.9380.

Look for an AUD/USD appreciation to 0.94 and possibly higher.

But, as the events of the last week highlight, USD spot rates are vulnerable to sudden shifts in USD sentiment in a market which is already heavily short USD. As such, the strategy to long AUD/CAD can be a better trade. The dilution of USD-direction and crossing two commodity currencies makes AUD/CAD significantly less volatile than AUD/USD (around 2-3% points less volatile over the last year).