Time for a correction for the overheated battler? Getting there, thinks Credit Agricole.
The FAST FXmodelsatoutthe volatility of last weekand while the AUD/USD and EUR/NOK are both looking overvalued this week, they are shortof triggering sell trades. The model is up 10.89% with a hit rate of 63%over the past year.
The primary model for AUD/USD has become unstable and the exchange rate’s secondary model estimates its fair value has risen slightly from 0.6810 to 0.6821. While the Australian government bond curve steepened relative to the UST curve, the Australian-US short-term rates differential and Australian export commodity prices headed lower. Spot AUD/USD headed higher on the back of investor optimism and has become nearly 1.5 standard deviations overvalued. This overvaluation is significantly short of the two standard deviations required to trigger a sell trade when a secondary model is being used to estimate fair value.
