SELL NZD/USD
Recent Chinese data weakness, coupled with rising geopolitical tensions stemming from developments with North Korea and the Middle-East, have seen 2016 begin in a heavily risk-off tone with Equities and Commodities getting hit. The New Zealand dollar’s lower liquidity and higher-beta status leave the currency vulnerable during risk-off periods and risk of further negative surprises out of China should keep downside intact. On the domestic front, last week’s disappointing NZ milk powder auction, with the EU bringing more milk supply to the market, alongside falling local inflation expectations, driven by the continued slide in oil prices, increases the likelihood of further RBNZ easing
Trade Of The Week Idea
- The break of the rising trend line from 2015 lows and key horizontal support at the December 2015 lows paves the way for further downside in NZD/USD in line with bearish Order Flow and VWAP.
- I will be monitoring a retest, if we get one, of the .6580 – .6620 area to set shorts initially targeting a move down into the low .64s support area. Stop above recent 67 highs.
