This is from WPAC's weekly high conviction FX trades, which are based on their macro, model and technical views.
(In brief):
- have a strong leaning in favour of "long risk" trades
- AUD and NZD as the most attractive G10 currencies
- CHF, USD and EUR are the most attractive shorts
NZD/CHF the most attractive candidate for a long
- NZD has benefitted from the sharp 30% rise in dairy prices during the past six weeks
- adds to the currency's already strong global appeal (thanks to its high real yield advantage)
- Dairy's rebound will also temper the RBNZ's enthusiasm for cutting the OCR
- Favours buying NZD/CHF on pullbacks rather than at market
- We buy NZD/CHF at 0.7050, stop 0.6975
On the cautionary side, the momentum may be with risk appetite but entry levels are far from compelling (VIX and CVIX are both at multi month lows)
- Our global data surprise index is rolling over
- Both the ECB and BoJ might underwhelm at their meetings
