Morgan Stanley maintains an AUD/USD sell-on rallies strategy, while holding the view that if the pair manages to stay below 0.9000, it would open the way towards its 0.8800 target.
"AUDUSD has continued to accelerate to the downside, partly driven by weakening data from China and falling risk sentiment into the FOMC," MS notes.
"We have added China to the list of risks that we believe are now likely to challenge the global risk environment: The continued weak data from China are likely to add to growth worries. This moves AUD back into the spotlight, and the bearish signals following the recent sharp AUDUSD fall suggest that further declines are likely," MS argues.
"From a technical perspective, AUDUSD is now approaching the 61.8% retracement level at 0.8982, and a move below here could open the way towards the 0.8924 low initially and then 0.8891," MS projects.
"While we remain bearish, we see better risk/reward selling at 0.9150, which is between the 38.2% and 50% retracement of the recent decline," MS advises.
In line with this view, MS runs a limit order to sell AUD/USD as a short-term trade at 0.9150, with a stop at 0.9250, and a target at 0.8800.
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