ja_mageia

Last Week:

AUD and NZD came under continued selling pressure last week, on the back of weak retail sales data out of Australia and the news that one of AMP’s mortgage funds in NZ had halted redemptions for 12 months.

Weaker than expected GDP data out of the U.S. on Thursday, caused the market to reconsider the USD recovery story, but provided no support whatsoever for the AUD/USD and NZD/USD that continued to trade lower.  USD/JPY managed to hold up somewhat, despite the weak GDP data – providing added downward pressure on AUD and NZD through the AUD/JPY and NZD/JPY crosses, as Japanese banks were seen unwinding some of their carry trades.

Thin market conditions on Friday night provided the opportunity for a large sell off in the AUD/NZD – which reached as low as 1.2755.

What we did:

Remained  short AUD/USD, NZD/USD and NZD/JPY, through spot and selling options above the market on the way down.

Played the range in AUD/NZD, but squared up when it broke lower on Friday evening on thin conditions.

This Week:

All eyes this week on the RBA’s interest rate announcement on Tuesday, and the U.S. FOMC meeting later the same day.  The market expects no movement on both accounts, but there is likely to be some dovish commentary from the RBA, and further warning of inflationary risks from the Fed, as further justification for keeping rates on hold.

Today’s (Monday) Labour Cost Inflation data is expected to further weigh on the NZD/USD today, and provide further fuel for lower interest rates in NZ.

What we will do:

Look to sell AUD/USD  and NZD/USD on rallies.

Stay short NZD/JPY whilst USD/JPY continues to weigh.

Await confirmation of USD recovery before entering G7 positions.