AUD/USD: We continue to see compelling reasons to be short – Morgan Stanley

Although AUD/USD bounces off a yearly low, snapping a four-day downtrend, Morgan Stanley stays bearish on the Aussie currency pair, targeting 0.7000 with a stop-loss point of 0.7800.

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Markets are pricing in excessive RBA hawkishness, with liftoff now fully priced for July 2022, compared to RBA guidance for 2024.

Higher US real yields and tighter breakevens suggest a weaker AUD. COVID-19 risks remain asymmetrically negative in Australia, particularly with the more transmissible Delta variant.

Rising concerns about global growth (as evident in the distribution of equity returns) should be AUD/USD-negative

Read: AUD/USD: Bearish impulsive remains intact above 0.7300 ahead of Aussie Retail Sales