FXA

Fifteen countries that make up nearly a third of the world's population and gross domestic product have formed the world's largest trading bloc.The Regional Comprehensive Economic Partnership, or RCEP, was

AUD/CAD crashed in Q1 2020, but rebounded sharply, and the pair continues to trade near its yearly highs.However, downside is likely, owing to the fact that the pair is probably still fundamentally overvalued.Yet downside is likely to be met with subsequent price consolidation. While markets may readjust lower, trailing economic data favors AUD over CAD.As more data is released, we may be able to build a case for additional downside. For now, downside is likely to be limited to the 0.91 handle.Other possible risks to consider, such as increased macroeconomic uncertainty through the winter, could also produce AUD/CAD weakness.

The dollar is consolidating yesterday's losses.Equities are lower, and benchmark yields are little changed.The S&P 500 is trading a little lower following yesterday's 0.2% decline.Gold rose almost 1% yesterday, the most in a couple of weeks, on the back of the weaker dollar.WTI for December delivery slumped 4% yesterday and slipped below the $40-mark and straddled today.

EUR/AUD moved significantly higher in February and March 2020, on the back of largely mechanical moves, as capital was repatriated.More recently, the pair has been trading between circa 1.60 and 1.66, although most recently EUR appears to be breaking out versus AUD.While the real yield for EUR/AUD has technically worsened this year, I believe longer-term forces will favor lower EUR inflation and higher AUD inflation.Meanwhile, rates are likely to remain constant, although higher AUD inflation could even beget higher interest rates in Australia.As sentiment seems to have shifted this year in favor of the EUR, it appears that there is potential for a self-reinforcing move higher.

The USD has not responded to the rise in VIX in recent days, which has intrigued a lot of traders who have been buying the greenback as a hedge.The US dollar has been negatively correlated to equities in the past 2 years (especially in 2020); hence, lower equities should coincide with a rising dollar.We do remain bearish on the British pound as we still think that it is the most vulnerable currency in the current environment.

The dollar is falling against most of the world's currencies today.Sterling and the Norwegian krone are leading the majors higher.The Chinese yuan extended its gains and is now at the best level since July 2018.In Asia, most of the large markets gained, but China, India, and a handful of smaller bourses were sold.Europe's Dow Jones Stoxx 600 is off for the third day and the sixth session in the past seven.

In the Asia-Pacific region, Japan, Taiwan, and Australian bourses led declines, while China, Honk Kong, South Korea, and India advanced.Europe's Dow Jones Stoxx 600 is straddling little-changed levels.US shares are recouping part of the losses suffered late yesterday.The euro and the Scandis are leading most of the major currencies higher.Emerging market currencies are narrowly mixed.

As global markets have entered into territory that is truly uncharted, historical increases in economic uncertainty have helped safe haven currencies outperform.But while the Invesco CurrencyShares Australian Dollar Trust ETF has gained by more than 25% since March 18th, 2020, the fund has seen pullbacks from the 73.84 highs.Ultimately, this might be creating a new buying opportunity if comparative strength in economics fundamentals starts to work as a precursor to new FXA highs into 2021.