Except for the market in Taiwan, the main stock markets in Asia havent performed well recently as expected. In the forex market, the AUD was continuously dragged down for its vulnerability of being affected by the Asian stock market due to Australian product export focusing on Asia. At the same time, the resurgence of Covid-19 pandemic in Australia may seem result in a moderate monetary policy by Reserve Bank of Australia(RBA). Among commodity currencies, the CAD and NZD are remarkably stronger than the AUD. Therefore, it is estimated that the future will see a relatively weak AUD.
So shorting the AUD is considered as a priority trading strategy, facing a strong USD or a rising risk aversion sentiment. Its generally better to trade AUD/USD. However, if the AUD is under pressure due to a rising risk aversion sentiment caused by the short-term volatility in Asian financial market, trading AUD/JPY is a good choice. Because the rising sentiment will boost the JPY. It is noted that if the whole stock market tends to stabilize, the JPY may drop, greatly relieving the pressure on the depreciation of AUD/JPY.
Whats more, if you make a trading strategy according to the monetary policy, you should take a look at AUD/NZD. Reserve Bank of New Zealand decided to cease the bond buying program this month, indicating a hawkish message. And New Zealand released the local Consumer Price Index(CPI) for the second quarter last Friday, an increase to 3.3% year-on-year, worse than the expectation of 2.8%, reflecting the locally rising inflation.
Thus, forex analysts forecast that New Zealand‘s central bank will announce an interest rate hike in the next rate-setting meeting(August 18). It is expected that the NZD is relatively more resistant than the weak AUD, in spite of a continuously strong USD. So it’s prudent to trade AUD/NZD as the mid-term trading strategy.