Trade Idea : 12Mos AUD Ratio Backspread

The LT AUD momentum chart has taken out the bottom end of the channel, while at the same time the AUD risk reversal curve has not fully priced in the potential for AUD weakness. 

While you have to pay away approx. 1% in vol terms to put this trade on in our view the AUD risk reversal curve is too cheap.

 

On initiation you will be approx. 12.5% net deltas short AUD long USD. So for example, if you did this on 100K AUD vs 250K AUD the net position would only be AUD12,500 AUD short.