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Day three: potential AUD/NZD trade

I missed out on my preferred entry point yesterday and the trade has since rallied as Glenn Stevens failed to talk about the AUD in yesterday’s speech.

New Zealand dollar
Source: Bloomberg

The pair is ominously poised to break above the July high (see attached daily chart); however I am not convinced to chase the pair ahead of today’s Q2 inflation print in Australia.

Trading around announcements is always tough and when the RBA has a single mandate of price stability (or controlling inflation); a miss to consensus can alter the dynamics of the currency market.

As things stand economists expect headline inflation of 3% and 2.7% on the trimmed mean print, which of course is what the RBA look at. The RBA target a range of 2-3%, so at 2.7% inflation is towards the top end of their range, which would throw weight that Australian interest rates are on hold for some time. My bias remains that the pair gravitates higher and (potential) longs positions are preferred in my opinion.

Spot FX AUD/NZD chart
Click to enlarge

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