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Battle of High Yielders

by Ashraf Laidi
May 6, 2009 14:11 | 54 Comments

Battle of High Yielders - AUDNZD May 6 (Chart 1)

The high yielding Aussie may be outperforming all currencies but not against the next highest yielderthe NZD. With Aussie rates kept unchanged at 3.00% and Kiwi rates at 2.50%, this looks to drive a textbook case of carry trade, whereby the higher yielding Aussie rallies during improved risk appetite. Today for instance, AUDNZD rallied in early morning US trade after better than exp ADP figures and the clarification of the BoA story. But technicals on the weekly AUDNZD show a resounding sign topping out, namely a triple top at 1.29 since December 2000. Further declines in the pair could unfold on at the next bout of risk aversion, especially as Aussie rates are superior to their NZD counterpart. Note that the pairs last retreat coincided with the March recovery in global appetite only to be reversed in April amid improved economic data in Australia and protracted pick up in appetite favouring higher yielders. Failure to break above the 1.2930 high risks in triggering a decline to the initial 1.2740s, followed by the 1.24. While I often said long AUDUSD is a preferred long term trade, long AUDNZD could be a long term hedge against reduced risk appetite.

 

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Comments (Showing latest 10 of 54) View All Comments
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 14, 2009 22:10
Fastpips, thanks for the feedback. I will update the sections on gold/oil ratio and cross-market correlations noting the reasons and implications about 1-2x per month.

Ashraf
fastpips
surrey, Canada
Posts: 69
16 years ago
May 14, 2009 22:06
Hi Ashraf,
I really appreciate your online work book. It is helping me to analyse the FX markets very well.
Keep bringing such online books in future too.
Thank You
Samso
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 14, 2009 21:59
Slaiman, i'm not a firm believer of the notion that US will recover before Europe. Just because the US patient entered the hospital before the EU, it does not necessarily mean that it will exit before the EU. the deep erosion from housing on employment, spending and credit formation is more critical in US than in EU. 20% chance we see 1.18. I expect 1.30-1.31 by year end.

Ashraf
slaiman7
Lebanon
Posts: 31
16 years ago
May 14, 2009 21:48

Dear Ashraf,

Where do you see the euro going, long run? With euro zone problems seeming worse than those of US and with the expectations that the US would recover before the eurozone, could we see Euro going to $1.18 or even parity?


thanks
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 14, 2009 21:04
adam, trying to break the previous downtrend line but far from closing above the key 1.2790

Ashraf
adamcpf
Lisbon, Qatar
Posts: 58
16 years ago
May 14, 2009 7:45
Good morning Ashraf, Could I ask you what you see coming up first for the AUDNZD pair? A retest of the 1.2930 or 1.2560 level? tks
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 13, 2009 0:22
Ced, i dont know about margin exposure or where you got in, but you certainly do NOT want to add to losing positions. you can do a partial hedge and buy Aussie vs USD and keep your euro short, or start scaling down. Aside from falling stocks being a negative for the euro, it could be negative statements about European banks needing stress tests (read story in my twitter).

Ashraf
Ced
London, UK
Posts: 12
16 years ago
May 12, 2009 22:09
Hi Ashraf,

Can you tell what will be in your opinion most important events for EURUSD this and next week (I guess tomorrow's US April retail sales is one of them)? On which day it will occur and if you know the time would be great.
Also, is there any chance that some of these events push EURUSD lower even without pullback in stocks? (I've shorted EURUSD two weeks ago and now I'm thinking should I cut my loses or should I add more to short position)

Thanks
Ced
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 12, 2009 21:35
Adam, i prefer to sell AUDNZD rather than AUDGBP. I am CAUTIOUSLY expecting the net downleg in stocks. Many things emerging about the Fed's stress tests being inadequate and banks' earnings were a one-off event. It's not too late to go into selling AUDNZD and selling NZDUSD or NZDJPY around 0.6080s and 58.70s

Ashraf
adamcpf
Lisbon, Qatar
Posts: 58
16 years ago
May 12, 2009 19:47
Hi Ashraf, hope all is well. So we have a 2nd down day of the indices in the making, so maybe the correction is on the way. I've longed the GBPAUD pair today anticipating a short term run up to the weekly M4 pivot point at the 2.0500 level, I don't know if you use pivots at all. Also it the 4hrly 200ema i'm using. I will however take profit at of the table at previous support around the 2.0240 level. Unfortunately I missed that pullback on the AUDNZD yesterday to the 1.2700 level, that would of been a very nice entry for a short for a retest of the 1.2500 area you were talking about. There's a lot being said now in the news about a possible correction coming. rgrds
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