Kit Juckes at Societe Generale highlights that speculative positioning in the Australian Dollar is the largest long since 2013, built despite deteriorating domestic data and lower yields. He argues AUD could rally on a credible cease-fire extension but warns much good news is already priced, suggesting better relative value in AUD/NZD and potential NZD/USD shorts.

Australian Dollar positioning looks stretched

"The currency that is most striking in the CFTC chart, is the AUD."

"The market built up the biggest long AUD position since 2013, growing it in recent weeks despite a wobble at the start of April."

"5y yields have fallen by 30bp in recent weeks as the economic outlook has deteriorated and end-2026 rate-pricing has dropped by 20bp this month."

"If a credible cease-fire extension is agreed, AUD seems bound to rally, but there is a lot of good news hard-wired rather than baked into the current AUD/USD price."

"AUD/NZD would be more attractive, if it weren’t for the fact that this pair is up 13% in the last year."

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