Back
11 Mar 2015
NZD/USD: Holding short for potential runner toward 0.70 - BNZ
FXStreet (Bali) - As Bank of New Zealand reports, they are nearing their initial target of 0.7217 for the NZD/USD, ahead of the RBNZ and FOMC, adding that their preference is to remain short NZD/USD heading into both those events for a potential runner toward 0.70.
Key Quotes
"We entered our short NZD/USD position just over a week ago at 0.7584, and find ourselves already very close to the initial target of 0.7217. NZD/USD has been driven lower by a combination of broad-based USD strength, an RBNZ consultation on property market controls, and threats made to NZ’s food security."
"This trade was intended to benefit most from February’s US labour market report (last Friday), and the upcoming FOMC decisions (19 Mar). The former worked in our favour, with the unemployment rate dropping to 5.5%, the top end of a 5.2% - 5.5% ‘natural rate’ range. We believe that next week’s FOMC meeting will see the buzzword ‘patient’ dropped, which in the absence of a material (downward) shift in the FOMC’s median ‘dot points’ forecasts for the Fed Funds rate, should help underpin the USD rally."
"We highly doubt the outcome of tomorrow morning’s RBNZ meeting will be significantly positive for NZD/USD. We expect to see the RBNZ’s forward rate track revised markedly lower, and Governor Wheeler to strike a decidedly neutral tone. The reference to unjustified and unsustainable NZD strength should be maintained, with the NZ TWI nowhere near matching the falls in NZD/USD over the past eight months."
"As such, we intend to let our short NZD/USD run past the initial target of 0.7217, with the intention of taking profit after the FOMC meeting next week. Wary of a sharp correction in the USD in the unlikely event the Fed does not deliver, we lower our stop-loss level to 0.7450 (from 0.7714) to preserve some profit. In the event we are stopped out, we likely look to re-enter this trade above 0.7500."
Key Quotes
"We entered our short NZD/USD position just over a week ago at 0.7584, and find ourselves already very close to the initial target of 0.7217. NZD/USD has been driven lower by a combination of broad-based USD strength, an RBNZ consultation on property market controls, and threats made to NZ’s food security."
"This trade was intended to benefit most from February’s US labour market report (last Friday), and the upcoming FOMC decisions (19 Mar). The former worked in our favour, with the unemployment rate dropping to 5.5%, the top end of a 5.2% - 5.5% ‘natural rate’ range. We believe that next week’s FOMC meeting will see the buzzword ‘patient’ dropped, which in the absence of a material (downward) shift in the FOMC’s median ‘dot points’ forecasts for the Fed Funds rate, should help underpin the USD rally."
"We highly doubt the outcome of tomorrow morning’s RBNZ meeting will be significantly positive for NZD/USD. We expect to see the RBNZ’s forward rate track revised markedly lower, and Governor Wheeler to strike a decidedly neutral tone. The reference to unjustified and unsustainable NZD strength should be maintained, with the NZ TWI nowhere near matching the falls in NZD/USD over the past eight months."
"As such, we intend to let our short NZD/USD run past the initial target of 0.7217, with the intention of taking profit after the FOMC meeting next week. Wary of a sharp correction in the USD in the unlikely event the Fed does not deliver, we lower our stop-loss level to 0.7450 (from 0.7714) to preserve some profit. In the event we are stopped out, we likely look to re-enter this trade above 0.7500."