Insights from citi bank

Clients turn bearish on AUD & NZD

Overall, the Big Picture in Citi’s flow is “caution”. We are recording a bearish shift from client flows three weeks ago, and that keeps us defensive.
Clients have started selling AUD & NZD – they are the most sold currencies in the G10 last week (Chart of the Week). Most of these flows are being driven by Real Money clients – which suggest that AUDUSD at 0.77 and NZDUSD at 0.73 are regions of reduction or
rebalancing. Behaviorally, this cap limits the upside possibilities – and any risk negative trigger would send these currencies significantly lower.
Downside momentum in EM FX continues to build with hedge funds. We pointed out last week that HF momentum on EM had turned negative (5day flows – 20day flows). Now this “sentiment shift” has turned into outright selling – mainly in Asian currencies. RM flows
generally follow HF flows by 1-2 weeks.

There are a few positive stories (clients buying SEK, buying CAD) – which are important for portfolio diversification. We caution both are heavily stretched, and may be the next correction story.

Strongest directional signals :

Sell NOK the new signal: this week our overlay suggests to sell NOK (now 5 days in) as leveraged flows reverse from overbought levels.

Regional Summaries :

G10 – Selling AUD and NZD which buying CAD and SEK are the G10’s strongest flows. Asia – Outflows from leveraged investors intensified. Inflows from RM and banks pulled overall flows positive. HKD and PHP saw selling from both RM and leveraged investors.

CEEMEA – RM remains more biased to a cautious positioning. Aggregate flow charts remain suggestive of a long FX position in the markets now.

LatAm – Saw net inflows from real money and leveraged investors. Such inflows were driven by BRL and CLP while COP, MXN and PEN fell out of favor.

Chart of the week: AUD & NZD bearishness appearing

Strongest G10 directional signals

Clients turn bearish on AUD & NZD

Banks Corporates Leveraged Real Money Total Selling Buying Clients have started selling AUD & NZD – in fact they are the most sold currencies in the G10 last week. Most of these flows are being driven by Real Money clients – which suggest that AUDUSD at 0.77 and
NZDUSD at 0.73 are regions of reduction or rebalancing. This is a bearish turn of events for both currencies.

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