ja_mageia

Monday 1^st September 2008

Weekly Ranges: 

AUD/USD: 0.8493 - 0.8694
NZD/USD: 0.6898 - 0.7097

AUD/NZD: 1.2220 - 1.2383  

Last Week: 

A somewhat choppy week on the majors, with conflicting data out of the U.S.  A strong GDP number was followed by a decline in consumer spending.The major story in this region was the resignation (or sacking) of the Foreign Minister in NZ on the back of an announcement that the Serious Fraud Office would investigate Mr. Peters for alleged misappropriation of party contributions. This has yet to be proven, but a parliamentary privileges committee investigation is likely to show that the PM was aware of other donations that had been received previously from an offshore based NZ businessman. NZD/USD traded heavy on the back of political uncertainty and expectations of interest rate cuts in both NZ and Australia in September.AUD/NZD has traded heavy for the last week on expectations that the RBA will cut by at least 25bp at tomorrow’s meeting.  

What we did: 

We remained net short of NZD/USD across the week, and have looked to pick up some AUD/NZD and sell on rallies ahead of the RBA announcement on Tuesday this coming week.Our short straddle positions in the NZD/USD have picked up some revenue, by virtue of the fact that we have remained in our predicted range.  

This Week: 

On the face of it we could reasonably expect to have a volatile week in both the AUD and NZD this week.
The RBA are likely to announce a 25bp rate cut at their meeting tomorrow, and we feel that this is largely priced into the market.  If anything the major risks are weighted towards the unlikely event that the RBA decided to leave rates on hold for now.  Whilst this is unlikely, there has been a pick-up in commodity prices in the last week, and inflationary pressures are starting re-appear in the Euro zone, suggesting that rates will be on hold there for a while. Political developments in NZ will dominate trade this week – with expectations that the parliamentary privileges committee process will be drawn out, as will be the SFO investigation into Winston Peter’s affairs.  This is likely to extend in the parliamentary recess period, but force the government to announce an election date.  Uncertainty will likely then prevail into the election.The USD direction will be driven early this week, but what happens with Hurricane Gustav and its effect on the oil price. 

What we will do: 

Our USD view will be determined by what happens with the Oil price, and the financial stocks effect on the Dow this week.We will look to trade the NZD to the downside against both the USD and the JPY – but do not expect these moves to be overextended too far below previous lows in the NZD/USD.Depending on the outcome of the RBA’s rate decision meeting we will be looking to pick up some AUD/NZD for look back above 1.2300.