Short NZD Trade (from 3-Oct to 10-Oct)
Real-Time AmpGFX – bought AUD and NZD to close short positions (Tue 10/10/2017 8:36 AM MDT)
Bought AUD at 0.7787 to close short
Bought NZD at 0.7077 to close short
Positions are now square.
The USD broadly is under pressure on Tuesday and US 10 year yields have fallen (down 3.6bp today)
The market may be seeing the renewed Trump free-wheeling tweets as raising political risk in the USA. It is hard to assess how significant is the political risk in the US, but the market may be shifting back to what it perceives as the safer play of buying emerging markets, and this may broaden out a to weaker USD trend. European economic reports continue print strongly, and if Catalonia separatist ambitions take a pause, this may boost EUR and keep USD on the back foot.
Real-Time AmpGFX – lowering s/l in NZD/USD, political risk (Mon 10/9/2017 8:20 AM MDT)
Positions
Short half unit NZD/USD at 0.7158; s/l 0.7107; t/p 0.6915 (s/l lowered)
Short half unit AUD/USD at 0.7790; s/l 7827; 0.7640
Comment
The NZD may be vulnerable to a short squeeze around the decision of NZ First’s to back either the Nationals or Labour/Green to form a government later this week.
Political risk in the US has lifted again over the weekend due to the twitter spat between Trump and Senator Corker, the Trump/Pence escalation of criticism of kneeling NFL players, and more Trump baiting of NKorea. Trump is also pushing his anti-immigration and border security platform, using DACA reform as a bargaining chip. These issues may get in the way of tax reform. They are yet another lurch by Trump back to his Alt-right agenda. This has tended to undermine the USD all year.
However, we are cautiously sticking with these long USD positions, since US rates and yields have been creeping up, the market is not really on board a rally into year end for the USD (CFTC positioning has gotten more short USD). US economic data, looking through the hurricane effects, are also showing more strength. Tax reform remains a key part of the current agenda.
Real-Time AmpGFX – Sold NZD/USD again (Wed 10/4/2017 11:47 AM MDT)
Sold half unit NZD/USD at 0.7158
Comment
We were stopped out of the NZD/USD short yesterday. We had a tight stop on this trade, hoping for a bit of quick follow through on the weaker dairy auction.
The rebound in NZD reflected a surprising fall in US yields on shifting speculation over the next Fed Chair (from a Hawk- Warsh, to a dove or moderate).
Bond fund manager Gundlach’s call for Kashkari the uber-dove got a lot of press, and seems a bit cheeky/manipulative of Gundlach. KashKari would not be likely pick, he lacks balance, experience, and cache. If Trump wanted to undermine confidence in the Fed totally, he might choose Kashkari; it is hard to imagine any advisor would lead him in this direction. But I suppose Trump can do the unexpected. And Kashkari does like to tweet.
Warsh is likely to have a lot of supporters and would appeal to Republicans in Congress, but he may be too hawkish for Trump. There is no clear candidate it seems. If you wanted a dove, then best to stay with Yellen, but she does not have the same vision on financial deregulation as Trump or Republicans.
I have sold a smaller portion of NZD, reflecting the choppy trading and directionless state of the market. But I still want some long in the USD.
NZ housing data and job ads data released yesterday are consistent with an economy losing momentum and no rate hikes on the horizon in NZ. Dairy prices were also lower in the auction this week.
US ISM non-manufacturing survey was also much stronger than expected. Even if these ISM data have been goosed by the hurricane effects, they can’t be totally ignored; they are at multi-year highs.
Position
Short half unit NZD/USD at 0.7158; s/l 0.7258
Real-Time AmpGFX – Sold NZD/USD (Tue 10/3/2017 9:02 AM MDT)
Sold one unit of NZD/USD at 0.7152
The Dairy auction came out with a 2.4% fall, despite the recent recovery in milk futures prices.
This may generate further selling in NZD.
Position
Short one unit NZD/USD at 0.7152; s/l 0.7193