The AUD started the year off with a bang and has slowly but surely become the biggest underperformer among the major currencies after it found a peak back in February.

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There are of course reasons why the currency has pushed lower. Firstly, we have the virus situation and whether the country will be able to open up before suffering another GDP contraction in Q4.

The secondly one is China, being Australia’s biggest export destination the slowdown in China has been an important driver of uncertainty for the AUD. Thirdly, we have the over 50% drop in Iron Ore which is of course Australia’s biggest export.

However, even though these drivers are still in focus, there is a possibility that the market might have overplayed its hand to the downside. Most recent CFTC positioning has shown that the AUD is not only the biggest net-short among the majors, but it is also the biggest net-short in the AUD’s history.

As always, we have more on this and how we look to potentially take advantage of it in our week ahead video.

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