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2 Mar 2015
Re-instating NZD/USD strategic shorts - BNZ
FXStreet (Bali) - Bank of New Zealand is re-instating NZD/USD strategic shorts at 0.7584, with an initial target at 0.7217, and then 0.70, with a stop at 0.7714, expecting the trade to be a USD-driven trade.
Key Quotes
"We re-enter a strategic short position at current spot (0.7584), with an initial target of 0.7217, and with an eye to our year-end target of 0.70. We set our stop at 0.7714."
"This trade was flagged in our Global FX Strategist of Monday 23 February. Having missed our opportunity to get short above 0.7600 on Thursday, we used this morning’s post-PBOC rate cut pop higher to set our position. In the near-term we note, that AUD and NZD tend to quickly fade these knee-jerk moves after PBOC rate actions, on the basis that a weaker CNY leads Asian currencies lower, and thus AUD and (to a lesser extent) NZD. Later this morning, our BNZ colleagues forecast NZ’s Q4 2014 Terms of Trade to fall by a chunky 3.4% q/q, though this will likely mark the cyclical bottom in the series."
"But this is a longer-view trade, and will primarily be driven by the USD side of the equation. We did not see anything nefariously dovish in Fed Chair Yellen’s semi-annual testimony last week. The only thing that is clear is that the FOMC has given itself more flexibility than before. If US data begins to positive surprise once more, the market will quickly jump back on to the ‘buy USD’ bandwagon. To that end, this Friday’s release of the US labour market reports will be important. But the make-or-break for this trade will likely come out of the FOMC decision on 19 March, where we may well see the key word ‘patient’ dropped, signalling a rate hike at any meeting thereafter."
Key Quotes
"We re-enter a strategic short position at current spot (0.7584), with an initial target of 0.7217, and with an eye to our year-end target of 0.70. We set our stop at 0.7714."
"This trade was flagged in our Global FX Strategist of Monday 23 February. Having missed our opportunity to get short above 0.7600 on Thursday, we used this morning’s post-PBOC rate cut pop higher to set our position. In the near-term we note, that AUD and NZD tend to quickly fade these knee-jerk moves after PBOC rate actions, on the basis that a weaker CNY leads Asian currencies lower, and thus AUD and (to a lesser extent) NZD. Later this morning, our BNZ colleagues forecast NZ’s Q4 2014 Terms of Trade to fall by a chunky 3.4% q/q, though this will likely mark the cyclical bottom in the series."
"But this is a longer-view trade, and will primarily be driven by the USD side of the equation. We did not see anything nefariously dovish in Fed Chair Yellen’s semi-annual testimony last week. The only thing that is clear is that the FOMC has given itself more flexibility than before. If US data begins to positive surprise once more, the market will quickly jump back on to the ‘buy USD’ bandwagon. To that end, this Friday’s release of the US labour market reports will be important. But the make-or-break for this trade will likely come out of the FOMC decision on 19 March, where we may well see the key word ‘patient’ dropped, signalling a rate hike at any meeting thereafter."