Long AUD/NZD (From 21-Jun to 25-June)
Real-Time AmpGFX – Sold AUD/USD & AUD/NZD to close long positions (Sun 6/24/2018 11:45 PM MT)
Sold half unit AUD/USD at 0.7416
Sold half unit AUD/NZD at 1.0749
Comment
Asian currencies are down significantly on trade/investment friction between the US and China, policy easing appears to be generating speculative selling of CNY, spreading to other Asian currencies/
So we are squaring longs in AUD set last week on possible easing in trade tensions.
No positions or orders
Real-Time AmpGFX – Bought AUD/NZD (Thu 6/21/2018 1:09 PM)
Bought half unit AUD/NZD at 1.0740
Comment
The Australian government passed income tax cuts yesterday, and it appears the governing coalition has gained some momentum and may be in a better place to be returned to power in an election.
Mining companies are announcing modest but meaningful capital spending plans. This suggests the downswing in mining investment has passed and this may help underpin economic confidence in Australia.
The Australian equity market has hit new highs in recent sessions. Banks have led the rebound which suggests that the market may be close to building in much of the weakness in banks related to a Royal Commission into their behaviour.
AUD has been more negatively affected than the NZD during the recent period of weakness in Asia emerging-market assets. This continues to be a downside risk for the AUD/NZD. But perhaps emerging Asian markets have built in a good deal of the uncertainty related to the US-China trade dispute.
We still see negative news coming on this front, but there is room for the market to develop a more optimistic view. There are reports that China is using back channels to negotiate with the US. Chinese authorities have suggested they will ease monetary and fiscal policy to underpin growth in China.
Australian commodity prices (iron ore and coal) have been somewhat negatively affected by the trade tensions recently, but have largely held firm. Milk futures prices have ebbed recently.
NZ GDP was weaker in Q1, in line with expectations, but has slowed below potential over the last year, below that in Australia, which has grown a little above potential. This is consistent with a range of activity surveys that suggest the Australian economy is running on a firmer trend than NZ.
The RBNZ policy meeting next week is likely to reiterate rates are on hold for the foreseeable future, similar to that expressed by the RBA in its minutes this week that may have contributed to some weakness in the AUD.
A housing market downturn in Australia remains a risk, but the pace of declines remains modest.
A rise in bank funding costs in Australia may be viewed as a negative for the AUD, highlighting the banking system’s vulnerability to global credit conditions. However, much of the recent rise may be related to an end of quarter squeeze on cash. Furthermore, the higher funding costs also push up the carry from long AUD positions.
Position
Long half unit AUD/NZD at 1.0740; s/l 1.0643; t/p 1.0933
Our Capital at Risk: 91bp
By setting an initial stop loss of 1.0643, our (AmpGFX) percentage loss would be 0.903%. Based on our trade size this represents 91bp or 0.91% of our trading capital.
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