Following David Woo’s highest conviction view for 2015 that AUD shorts are the best vehicle to express USD strength, BofAML FX trading retain their bearish conviction during today’s session after fresh lows for the year printed and we closed below 0.8600 for the first time in 4 years. Whilst RBA Deputy Governor Lowe added more fuel to the fire yesterday making comments that further adjustment in the AUD$ are expected and that the door for further rate cuts remains open, there is significant strike congestion today around 0.8550 for NY cut expiries that may pin spot until then. That being said, shorter term, we view the next break below 0.8500 to herald a move to at least 0.8425 with AUDXXX trades also in vogue, notably AUDCAD which trades lower ahead of Thursday’s OPEC meeting.
The Swiss gold referendum looks increasingly unlikely to pass and EURCHF traded to 1.2033, having touched 1.2009 last week. We continue to have faith in the ability of the SNB to defend the floor and at these levels risk/reward continues to be skewed towards being long EURCHF. After the first polls that showed the ‘yes’ camp with a 6-point lead, support for the gold initiative has waned, with the latest polls showing a significant lead for the ‘no’ camp (64% to 28%) and a decline in undecided voters to only 8%. We don’t expect any new polls ahead of the November 30th referendum. Note that polling stations close at 12pm on November 30th, though most ballots are mailed in ahead of time. The deadline for mailing in ballots was yesterday (25/11/14). Results will be available later that same day (30th), with an official statement and press conference expected no earlier than 4pm local time.