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Long AUD/NZD (from 5-Feb to 12-Feb)

Real-time AmpGFX – sold to square USD longs and AUD/NZD (Mon 2/12/2018 9:03 AM)

Bought half unit NZD at 0.7239

Sold half unit USD/CAD at 1.2606

Bought half unit EUR/USD at 1.2262

Sold one unit AUD/NZD at 1.0810

Comment

I have closed my long USD positions and my long AUD/NZD position.  I am square apart from the bitcoin ETN (COINXBE).

I wanted to return to square; after an erratic day of trading on Friday,  I think it is time to retest my views.

An initial concern that comes to mind is that equity markets may start to find their feet, and this has not been good for the USD.

Partisan politics in the US has led to a big blowup in the budget, and will limit its capacity to attempt to narrow it.

The chances of any bipartisan efforts to reduce government spending succeeding in the US under a Trump presidency are very slim.

There is an argument that the weaker dollar theme could be propelled by budget risks.

Trump is supposed to be announcing budget cuts.  If these fall flat and acrimony and blame games start in Congress, it will not be a good look.

A strengthening US economy and rising inflation expectations, raising US yields should tend to support the USD, but it is not clear that this will be a deciding force.

We will be looking at selling US bonds again as one of the best ways of trading this theme

AUD/NZD appears in a range and is not compelling at the moment.  RBA was more successful in dampening rate hike expectations, NZ retail sales data were strong, there is a lot of political machinations in both countries, housing markets are weaker, China developments are murky.  AUD is curiously trading as the more risk-sensitive currency.

XBT is working against resistance at the top of the gap after Thanksgiving last year (9022); since its low in Feb it has been making higher highs and higher lows.  I think it looks constructive.

Positions

Long half unit COINXBE at 345.00

Real-time AmpGFX – Bought Aud/Nzd (Wed 2/7/2018 5:21 PM MT)

One unit at 1.0797

Reestablishing Long

(stopped out on position below)

Real-Time AmpGFX – AUD/NZD trading view (Mon 2/5/2018 1:21 PM)

We bought AUD/NZD earlier today with the pair trading near the bottom of its recent range, even as its rate spread has continued to creep in favour of the AUD.

We have retail sales and trade data in Australia later today

Commodity priced have improved for Australia in recent months, and broader economic activity has tended to be stronger than expected.  Employment and consumer confidence indicators have been improving.  As such, there is no reason to expect weak data.

The RBA policy statement on Tuesday is unlikely to reveal much.  The quarterly statement on MP on Friday may reveal a bit more optimism that the labour market is strengthening and recovery gaining momentum.  It may tend to fuel optimism that a hike is likely later in the year.

More important may be New Zealand labour data on Wednesday and RBNZ on Thursday.  We see risk biased towards weaker employment data in line with softening in job ads and business surveys through last year.

After a much weaker than expected NZ CPI in Q4, the potential for weaker employment and broader softening in business surveys, the RBNZ may express concern over low CPI inflation and emphasize the need to maintain rates at their record low for longer.

On various indicators recently, Australia has been out-performing NewZealand, including CPI, job ads, and business surveys.

Both countries have experienced firmer commodity prices recently.  New Zealand may receive some positive news from its dairy auction on Tuesday

However, Chinese steelmaking commodity prices have firmed in the last week, and Chinese financial markets are relatively stable.

As we were typing, US yields spiked lower with the US equity market, and we were stopped out (in profit) of our remaining short US Treasury bond position.

Positions

Short  half EUR/USD at 1.2490; s/l 1.2533 (lowered from 1.2623); t/p 1.2128

Short half unit NZD/USD at 0.7302; s/l 7388; t/p 0.7208

Long one unit AUD/NZD at 1.0687; s/l  1.0763; t/p 1.1283

Real-Time AmpGFX – Bought AUD/NZD (Mon 2/5/2018 10:53 AM MT)

Bought one unit AUD/NZD at 1.0867

Comment to follow

Positions

Short half unit TYH8 at 122.203125; s/l 121.09+(yield at around 2.77%)  (lowered from 122-06+)

Short  half EUR/USD at 1.2490; s/l 1.2533 (lowered from 1.2623); t/p 1.2128

Short half unit NZD/USD at 0.7302; s/l 7388; t/p 0.7208

Long one unit AUD/NZD at 1.0687; s/l  1.0763; t/p 1.1283



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