Short NZDCAD for a target of 0.90 - TDS

Analysts at TDS suggest to enter the short NZDCAD trade at current levels and target a move to 0.90.

Key Quotes

“We continue to think that NZD screens rich in the dollar bloc. This comes amid a lack of data momentum and the breakdown of existing correlations since the start of the year. CAD's data momentum is now the worst in the G10 but that is also baked into the cake. CAD's NEER is running about 3% from its 3mma while NZD looks close to flat on this metric. However, NZD data momentum remains negative and has decelerated sharply from three months ago.”

“Our short-term positioning and valuation models favor this rotation as well, owing to the fact that the market is running a modest NZD long and a deeply short CAD view. We also note that NZDCAD is running rich to our HFFV signal with the implied level from each bi-lateral cross pointing to a move towards 0.92.”

“Technicals

The cross made a break of the trend line drawn off the January lows and a key level watch is the 50dma near 0.9241. A break there opens up a move towards the 200dma near 0.9085.”