News

Monday 28th July 2008

Ranges
NZD/USD 0.7387-0.7635
AUD/USD 0.9540-0.9792 NZD/AUD 1.2750-1.2966

LAST WEEKS NEWS

Demand destruction in the Oil markets, and the unwinding of the long Oil/short Financials trade by several hedge funds provided some support for the USD, and the start of a shift in sentiment in favour of the USD.

Strong durable goods numbers, new home sales and consumer confidence date provided additional support for the USD towards the end of the week, and some support for the Dow.

Activity in this part of the world was dominated by a somewhat unexpected early rate cut of 25bpt by the RBNZ, and an increased provision by the National Australia Bank against their remaining CDO exposures.

AUD and NZD both sold off on these developments.

WHAT WE DID

Called the RBNZ rate decision correctly and were short into the announcement and remain so.

Sold NZD/AUD on any rally for short term plays, and continue to expect it to move lower.

THIS WEEK'S NEWS

Early moves on commodities (especially Oil), and the Dow this week will look to confirm whether the USD rally is sustainable and whether we are indeed seeing a bottom formation developing.

Expect a relatively quite start to the week with all eyes on Q2 GDP data of the U.S. and non-farm payrolls at the end of the week to provide support for U.S. positive sentiment.

Closer to home we can expect softer NZ Building permits (Tues) and lower building approvals in Australia (Wed) to endorse recent moves lower on the NZD and AUD, with continued rate cuts in NZ, and the potential for lower rates in Australia being priced in.

WHAT WE DID

We look to sell rallies in both the NZD and AUD, and await confirmation of a shift in sentiment for the USD before entering further long USD trades.

See EUR/USD and GBP/USD on rallies.