Traders said that macro hedge funds have increased their bets on the Australian dollar, boosting their exposure to options that will pay off if the currency continues to rise against major currencies.
Data from the Depository Trust & Clearing Corporation (DTC) shows that last week, the volume of options trading on the Australian dollar against the US dollar was the most active in two days since the end of July. During these two days, the volume of call options (contracts that profit when the Australian dollar appreciates) was three times that of put options, with a transaction value of 150 million Australian dollars (about 100 million US dollars) or more. The Australian dollar against the US dollar exchange rate soared, reaching its highest level since November last year.
Ivan Stamenovic, head of G-10 foreign exchange trading for Bank of America in the Asia-Pacific region, said: “The macroeconomic community is looking to build positions in anticipation of a potential breakthrough, so we continue to see sustained interest in call options on the Australian dollar against other currencies in the market.”
The Australian dollar was the second-best performing major currency in September, trailing only the Norwegian krone. Macro funds are betting that the Australian dollar will continue to perform strongly in the coming weeks, driven by robust household spending, stronger-than-expected economic growth, rising commodity prices and the hawkish signals from the Reserve Bank of Australia. Reserve Bank of Australia Governor Michelle Bullock said earlier this month that strong consumer demand may limit the scope for interest rate cuts.
Macro funds are not only betting on the Australian dollar strengthening against the US dollar. The Australian dollar has also climbed to multi-month highs against other Group of Ten currencies.
The Australian dollar has risen to its highest level against the Canadian dollar since November last year, buoyed by weak Canadian economic growth and labor data. These reports have increased the likelihood of the Bank of Canada cutting interest rates by 25 basis points on September 17th, as expected by traders. DTCC data shows that last week was the busiest day for Australian dollar options trading, with all transactions over 50 million Australian dollars against the Canadian dollar being call options.
Troy Fraser, head of foreign exchange sales for Australia and New Zealand at Citigroup in Sydney, said: “Over the past two weeks, we have seen hedge funds express their bullish view on the AUD/USD through call options on the Australian dollar. The AUD/CAD and AUD/CHF are also popular currency pairs for expressing this bullish view on the Australian dollar.”
Technical analysis:
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Gold: Last Friday, the green buy limit area we alerted through the plugin triggered twice; the yellow area sweep for liquidity also achieved a profit-to-loss ratio close to 2. For today’s intraday trading, we will continue to prioritize the long position strategy. Breakthrough buying should focus on the 3645/50 area; for low buying, pay attention to the 3635/25 area. For detailed positions, please consult the plugin.
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Nasdaq: Last Friday, the effect of our plugin’s reminder to directly buy upon the breakthrough of the blue area was achieved perfectly. Continue to pay attention to the bullish signals after the pullback following the intraday breakthrough. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The situation in the Middle East has heated up again, and the price has started to stabilize and rebound. Within the day, we suggest waiting for the price to recover to around 63.50 before looking for signals of further increase. For detailed positions, please consult the plugin.
(Crude oil 15-minute chart)
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Today’s key economic data and events to focus on:
17:00 Eurozone July seasonally adjusted trade balance
20:30 US September New York Fed Manufacturing Price Obtained Index
