Relevant articles for you

Video

Kay Van-Petersen
Saxo's global macro strategist Kay Van-Petersen considers whether or not the impeachment of US president Donald Trump will realistically happen.
Day trade
Trade view / 09 June 2016 at 8:37 GMT

#SaxoStrats: NZDUSD Put on RBNZ overreaction

Head of FX Strategy / Saxo Bank
Denmark
Price target:
Market price:
strats
 
Background

The Reserve Bank of New Zealand failed to cut rates at its most recent meeting, a cut that was expected by a large majority of analysts. The NZD squeezed violently higher on the news, likely mostly as a function of short-term market positioning and weak USD longs after the recent bad US economic data, rather than anything in the new RBNZ guidance. 

That guidance remains very dovish and clearly indicative of further interest rate cuts in the pipeline. With global bond markets marching higher and higher and yield curves flattening, the risks are growing and economic slowdown fears spreading, which could provide strong headwinds for riskier assets and less liquid currencies like the kiwi. 

In addition, the kiwi strength itself increases the odds of a more aggressive message on currency weakening from the RBNZ, which already clearly disapproves of the current level. We generally prefer to trade in options as this trade goes against the current market direction and because the UK referendum risks extreme volatility in coming weeks that could spread across asset classes.

Risk description

Ongoing USD weakness on fresh, weak US data and strength in risky asset prices are the chief risks to this trade.

Parameters

parameters
 
NZDUSD daily:
nzdusd
Source: Saxo Bank. Create your own charts with SaxoTrader click here to learn more 

NZDUSD weekly:
nzd
Source: Saxo Bank 

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail