Moar Bird

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Adding to short NZD exposure via short NZDJPY.

by Brent Donnelly

August 14, 2024

Q: Which came first, the chicken or the egg?

A: Red Junglefowl.

Image source: Wikimedia Commons

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Short NZDJPY @ 88.50

Stop loss 90.26

Take profit 86.01

Long AUDNZD @ 1.0954

Stop loss was 1.0834

now 1.0954

Take profit 1.1111

Kiwi

The RBNZ cut sort of unexpectedly, and I think there is more room to run. Much as GBP has suffered vs. peers following the similarly kind-of-a-surprise cut on August 1, I don’t think NZD has fully made its move. The long AUDNZD is in the money and I like adding to it here via short NZDJPY. The chart is nice and gives you a clear exit point.

Rate differentials also support lower NZDJPY.

I like short NZDJPY here (88.50) with a stop loss above the RBNZ point (89.40) and the major horizontal resistance (90.00). See sidebar for new trade. This doubling of risk means I will move the stop loss on the AUDNZD up to the entry point so that net there is only one trade’s worth of downside here if the kiwi were to stage a massive reversal (that is, the first trade worst case scenario is now zero P&L, not down). Trade your own view—none of this is investment or trading advice.

Orr speaks in parliament tonight (17:10 NY) and we also get Aussie jobs (21:30 NY).

Short NZDJPY has some beta to equities and while I have underestimated the ferocity of this rebound, I don’t think we are going back to the ATH. These face-rippers are more the type of rally you see in bear markets, not bull. I am too scared to short NQ or anything remotely similar but NZDJPY seems like a more chicken way to do so and hopefully benefit from the monetary policy trade even if stocks continue to wow.