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“If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it.

W. C. Fields

Commentary & Analysis

Shorting the New Zealand dollar?

I shorted the New Zealand dollar today; it’s my second try this year. J Below are my three rationales:

1)      I liked the chart setup: A nice symmetrical corrective rally into minor wave 2 into the 0.8432 high…

2. The current account deficit may matter and could get worse:  New Zealand isn’t an emerging market country, but it does act like one at times from a funds flow perspective.  If the US Fed follows through on tapering there is concern money will flood out of emerging markets.  Secondly, if China’s demand is indeed fading, then it should hit New Zealand’s current account directly.

3. The yield spread favoring New Zealand over the United States should fall: This guess of course is dependent on what I noted above—if the US Fed follows-through with tapering (there are no guarantees given the dismal jobs report last month from the US and the decline again in the Participation Rate).

New Zealand 10-year Yields: Turning over?

2-year Yield Spread New Zealand – United States vs. NZD/USD: