Long AUD/NZD (From 10-Apr to 13-Apr)

Real-Time AmpGFX – sold/AUD/NZD to close long position (Fri 4/13/2018 11:08 AM MT)

Sold half unit of AUD/NZD at 1.0561 to close long position


As discussed in my AmpGFX report yesterday, the AUD appears to have become more risk-sensitive than the NZD. This is something that I was noticing last year, but appears to have become more persistent.

In part, this may relate to the greater connection in Australia to cyclical and financial developments in China and the risk emanating from the US/China trade dispute.  But it is morphing from there to be broader.

While in the last week trade news appeared more conciliatory, Trump is gaining popularity by talking tough on trade with China, and he is looking for distractions from the Mueller investigation.  Comey in on the talk shows next week with his new book and WSJ reports that the US is set to announce its $100 bn list of goods subject to tariffs next week.  I don’t sense we will see a sustained improvement in trade rhetoric.

Chinese credit data on Thursday show deleveraging in the shadow banking sector is increasing, posing risks to growth. Chinese imports of iron ore have flattened out.

Other geopolitical risks are brewing with sanctions on Russia have an impact on the RUB, and it seems CHF.  A Syria attack is coming.

As discussed in my AmpGFX report, a look through basic fundamental metrics suggest that in the last 5 to 10 years, NZ has closed the ‘risk’ gap with Australia, and even over-taken it.  The political cycle is turning against the AUD and banking Royal Commission is an additional threat to the housing market.  As the year progresses, it is easy to see the AUD becoming even more risk-sensitive relative to the NZD.

Rates spreads and relative economic performance appears to be having less impact on the AUD/NZD.

As such, after looking more closely at the cross, I am less enthusiastic to be long, even though it may seem cheap when modelling vs rates and commodity prices.  Given the connection to rates is weaker, commodity price suggest bounce from here could be limited.

Real-Time AmpGFX – bought AUD/NZD (Tue 4/10/2018 9:00 AM MT)

Bought one unit AUD/NZD at 1.0537


Iron ore and coal prices are firmer in recent sessions. Chinese President Xi has made comments seen to reduce some of the trade dispute between the US and China.  AUD/NZD has appeared to respond negatively to trade-induced risk aversion.  The AUD/NZD yield spread has been moving in favour on the AUD/NZD since mid-March.

The AUD/NZD should start to find support technically after a significant move down to near 1.05, potentially around an uptrending base-line since 2015.


Long one unit AUD/NZD at 1.0537; s/l 1.0433; t/p 1.0748



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Greg Gibbs,
Founder, Analyst and PM
Amplifying Global FX Capital Pty Ltd