Most of the EURAUD gains were on Thursday & Friday last week when AUD significantly under performed EUR even in a weak DXY global environment. This happened because of sustained commodity weakness across copper & crude. We believe the pair is over bought as Euro fundamentally is a very weak economy as seen by recent economic indicators such as PMIs, GDP, industrial production, falling inflation, falling Q2CY24 wage growth data as well as continued run of weak data in China. Without China turning corner, Euro is over bought & is sustaining at these levels due to the benefits of weak DXY environment currently. On the other hand AUD is unlike to see any rate cuts in CY24 from RBA. We also expect the current commodity weakness to consolidate & support AUD. We also expect ECB President Lagarde to have a more dovish (than what is currently being priced in) press conference on 12th Sep ECB meeting. Hence we recommend shorting EUR against AUD.
