5 Jun 2015
NZD/USD: Bearish drivers consistent with view - ANZ
FXStreet (Bali) - Sam Tuck, FX Strategist at ANZ, notes that after their 11 May call to short NZD/USD at 0.7405 with a target of 0.7010, they now lower their target to 0.6827, adding that they now remove the stop loss at 0.7610 and spend 1/6th of our profits to protect gains over the coming period of high event risk.
Key Quotes
"Since we initiated our short NZD/USD recommendation on 11 May (at 0.7405 with a target of 0.7010 and a stop loss at 0.7610), domestic events have unfolded in a manner consistent with our view."
"A weak dairy opening price for 2015-16 has been confirmed, non- OCR measures have been announced to target strength in Auckland house prices, measures of inflation expectations have remained low (or even fallen further), the RBNZ has again acknowledged it cannot explain all of the weakness in recent inflation outturns, and the economy is showing less pep, with some leading indicators (such as the ANZ Business Outlook) retreating off elevated levels."
"Internationally, we have also seen a supportive USD environment, despite some weakness in May data. Thus, the market has moved to price in the majority of our targeted move. "
"Given low core inflation and a shifting economic risk profile, we remain confident in our opinion that the NZ economy needs lower interest rates and that the RBNZ will cut the OCR next week (and in July)."
"This should further entrench the NZD’s recent moves, and we lower our estimates of how far the NZD could move this cycle, taking our take profit level on our short kiwi trade down to 0.6827 (from 0.7010)."
Key Quotes
"Since we initiated our short NZD/USD recommendation on 11 May (at 0.7405 with a target of 0.7010 and a stop loss at 0.7610), domestic events have unfolded in a manner consistent with our view."
"A weak dairy opening price for 2015-16 has been confirmed, non- OCR measures have been announced to target strength in Auckland house prices, measures of inflation expectations have remained low (or even fallen further), the RBNZ has again acknowledged it cannot explain all of the weakness in recent inflation outturns, and the economy is showing less pep, with some leading indicators (such as the ANZ Business Outlook) retreating off elevated levels."
"Internationally, we have also seen a supportive USD environment, despite some weakness in May data. Thus, the market has moved to price in the majority of our targeted move. "
"Given low core inflation and a shifting economic risk profile, we remain confident in our opinion that the NZ economy needs lower interest rates and that the RBNZ will cut the OCR next week (and in July)."
"This should further entrench the NZD’s recent moves, and we lower our estimates of how far the NZD could move this cycle, taking our take profit level on our short kiwi trade down to 0.6827 (from 0.7010)."