Short NZD trade and comment 12 June
Mon 6/12/2017 4:15 PM MDT
Real Time AmpGFX – NZD comment
We sold NZD today because it appears to be close to a key resistance after a strong rally in the last month.
It appears to have a closer relationship with US yields this year, and the rebound in NZD reflects the fall in US yields recently, and in general a weaker USD and strong emerging market assets.
NZ economic reports have been weaker than expected in the last two weeks; including retail sales, job ads, manufacturing activity and building volume in Q1. The later two suggest the GDP report may be weaker than expected in Q1, released later this week. NZ housing indicators have also been slowing this year, and sales growth has also weakened significantly.
Milk prices are stronger since March and iron ore prices are weaker, helping explain a strong NZD that AUD , but may milk have leveled off more recently.
NZD positioning appears relatively square, with shorts squared up.
An issue that has been little discussed is the 23 September election. The market appears too complacent that NZ First will not return as a king-maker and their policies on immigration and housing appear closer to the Labour Party.
I expect the Fed to be relatively neutral for the market, but will at least keep the third hike this year in the forecast.
Equity markets globally may be facing more headwinds; some weakness is global investor confidence may weigh on the NZD.
A key risk for the trade is a weaker USD and lower US yields related perhaps to political uncertainty in the US.
Positions
Short half unit NZD/USD at 0.7195; s/l 0.7258; t/p 0.6938
Short half unit AUD/USD at 0.7547; s/l 0.7623; t/p 0.7388
Mon 6/12/2017 11:50 AM MDT
Real Time AmpGFX – sold NZD/USD
Sold half unit NZD at 0.7195, comment to follow