The ‘true risk on’ flows has led to a resurgence of the interest to hold Aussie longs in a move that may appear counterintuitive based on the AU-US bond yield spread fall but…
...It makes perfect sense as the ‘true risk on’ flows lead to a lower DXY, higher Yuan, spike in equities, which results in AUD positive flows absorbing diminished appeal towards AU yields.
The latest swing has created a higher high structure which seems to be falling way short in magnitude compared to the previous buy-side flows originating from March 8th low.
With the Aus-US bond yield spread so depressed, any hiccup in the ‘risk on’ environment that leads to a DXY recovery exposes a fragile Aussie to significant supply imbalances.
...It makes perfect sense as the ‘true risk on’ flows lead to a lower DXY, higher Yuan, spike in equities, which results in AUD positive flows absorbing diminished appeal towards AU yields.
The latest swing has created a higher high structure which seems to be falling way short in magnitude compared to the previous buy-side flows originating from March 8th low.
With the Aus-US bond yield spread so depressed, any hiccup in the ‘risk on’ environment that leads to a DXY recovery exposes a fragile Aussie to significant supply imbalances.
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