RBA provide interim relief to vulnerable AUD – no other strategy but shorting to rescue overvalued currency risk

The minutes of the monetary policy meeting of the Reserve Bank Board for November provided no significant surprises. The Aussie gained on Tuesday after minutes of the central bank's November board meeting noted some scope for further easing, though with overall conditions accommodative, AUDUSD traded at 0.7102, up 0.07%. 

As anticipated RBA board meeting minutes have note provided any new information, as a result renewed weakness in global commodity prices should weigh on a still overvalued AUD this week.

Recent price declines should highlight Australia's large exposure to a slowing Chinese economy and the inability of its shrunken manufacturing export sector to compensate without further currency weakness (see FX Themes: AUD and NZD: Still expensive, 12 November 2015).

We carry technical stance as bearish AUDUSD against resistance near 0.7225 and looks for a move lower toward the 0.6935/0.6895 lows. A breach of the latter would signal further downside toward our greater targets near 0.6250.

Hence, shorting this overvalued currency cross (around 14%, see above charts) via near month futures would derive positive cash flows with leveraging effects targeting 0.6935 levels.