Resilience supports staying long – Societe Generale

Societe Generale’s Kit Juckes highlights the resilience of the Australian Dollar despite higher Oil prices and Australia’s heavy reliance on imported petroleum. He notes that speculative AUD longs have not been unwound and that AUD/USD has barely slipped since late February. Juckes stresses that relative interest rates continue to move in AUD’s favour, supporting a strategy of staying long.

AUD holds firm despite Oil shock

“The Australian dollar has been resilient in the face of rising oil prices.”

“Hence, despite being a major exporter of natural resources, including natural gas, the economy is vulnerable to a protracted spike in oil prices.”

“Our reaction a week ago, was that the size of AUD speculative longs in the FX market and the country’s dependence on imported petroleum in particular, could trigger an AUD correction, even though we think it can reach higher levels in the coming months.”

“It would seem that holders of long AUD positions have remained reluctant to part with one of their favourite trades.”

“AUD/CAD has produced a positive return since the start of the US war with Iran, but a mere 0.06% fall in AUD/USD since the end of February is very impressive.”

“…relative rates are still moving firmly in the AUD’s favour, proving more support today than when AUD/USD was at 0.76 in 2022.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)