FxWirePro: Bid 3m AUD/USD OTC tools and hedge via delta puts on upbeat Aussie trade surplus

RBA has maintained the status quo in its monetary policy, keeping cash rates at 1.50%. Consequently, Aussie has shown vigorous rallies up to 0.7264 levels but the major downtrend seems to be intact.

While Australia's trade surplus expanded considerably to AUD 3.68 billion in December 2018 from an upwardly revised of AUD 2.26 billion, easily beating the market consensus of a surplus of AUD 2.3 billion. It was the largest trade surplus since December 2016, as exports fell by 2 percent to AUD 37.92 billion, while imports declined at a faster 6 percent to AUD 34.24 billion. Considering 2018 the whole year, the trade surplus surged to AUD 22.15 billion from AUD 9.87 billion in the same period of 2017.

Aussie imports of consumption goods fell 7.1% m/m as automobiles fell 25.3%, after increasing 12% in November. Capital goods were down 15.4% m/m, as the lumpy civil aircraft component fell 61%. Fuel imports declined 7.8%. Service imports rose 2.7% due to a 5.6% rise in travel.

AUDUSD OTCHedging Perspectives:

Let’s just quickly glance through OTC outlook of AUDUSD, before proceeding further into the strategic framework.

Please be noted that the positively skewed IVs of 3m tenors signify the hedgers’ interests to bid OTM put strikes up to 0.70 level (which is in line with the risk reversal numbers (refer above nutshells).

The bearish neutral risk reversals of the 3-6m tenors that signifies the bearish scenarios, in that nutshell, AUD OTC hedgers’ sentiments substantiate that their risk mitigating activities for the downside risk projections. Courtesy: Sentrix, ANZ & Saxo bank

Currency Strength Index: FxWirePro's hourly AUD spot index has shown 55 (bullish), while USD is at 78 (bullish) while articulating at 10:16 GMT. 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex