Morgan Stanley’s contrarian short-term strategy model identifies AUD/USD as a preferred short.

Although tactical investors are currently long AUD, the sentiment is likely stretched, and MS sees it as a crowded long, increasing the risk of a pullback.

With upcoming Fed policy risk and markets already moderately short USD, a hawkish surprise or stabilizing USD sentiment could push AUD/USD lower.

AUD is also exposed to China sentiment, and any disappointment there could further weigh on AUD.

SHORT AUDUSD

May 07 2025