SHORT GBP VS AUD, NZD, USD: FADE RALLIES - RETAIL SALES BEAT
Retail sales outperformed on all cylinders today and GBP as expected has rallied into nice shortable levels now - with brexit uncertainty likely to continue to way and continued dovish BOE support also equally weighing on sterling in the future.
My preferred shorts immediately are vs USD as i expected Fed Dudley and Williams (speaking today) to talk the extremely battered USD higher (as they did earlier in the week).
I also like medium-term (end of next week shorts) vs NZD and AUD as GBPAUD and GBPNZD come into nice resistance at 1.81 and 1.713, after closing two days with both aussie and kiwi weaker i think this third day higher will be the last and thus a high probability opportunity to short GBP - I also like these AUD and NZD longs given the above average employment reports from both NZD and AUD this week which seemingly are yet to be priced vs GBP.
Further the medium term view vs AUD and NZD of short GBP derives from the trend - where you can see GBP has lost 1000pips post brexit as the implied interest rate differential between GBP and AUD/ NZD has increased and is projected to increase as BOE ease rates and AUD and NZD rates are likely to remain stable (especially AUD given the SOMP and RBA minutes). Whilst NZD rates remain at the pinnacle of 2% so even if the RBNZ does ease as expected the differential between sterling and kiwi will remain the highest for yield seekers for the next 50bps lower, which is likely to be neutral.
Trading strategy - Short GBP vs AUD, NZD, GBP in proportionate SMALL lots and add if higher:
1. Short GBPUSD @1.317 - 1.305/8TP1 1.290TP2
2. Short GBPAUD @1.713 - 1.693TP1 1.673TP2
3. Short GBPNZD @1.81 - 1.7910TP1 1.777TP2
I also like this strategy given the 3-way exposure net hedges any individual cross risk e.g. aud nzd or usd.
My preferred shorts immediately are vs USD as i expected Fed Dudley and Williams (speaking today) to talk the extremely battered USD higher (as they did earlier in the week).
I also like medium-term (end of next week shorts) vs NZD and AUD as GBPAUD and GBPNZD come into nice resistance at 1.81 and 1.713, after closing two days with both aussie and kiwi weaker i think this third day higher will be the last and thus a high probability opportunity to short GBP - I also like these AUD and NZD longs given the above average employment reports from both NZD and AUD this week which seemingly are yet to be priced vs GBP.
Further the medium term view vs AUD and NZD of short GBP derives from the trend - where you can see GBP has lost 1000pips post brexit as the implied interest rate differential between GBP and AUD/ NZD has increased and is projected to increase as BOE ease rates and AUD and NZD rates are likely to remain stable (especially AUD given the SOMP and RBA minutes). Whilst NZD rates remain at the pinnacle of 2% so even if the RBNZ does ease as expected the differential between sterling and kiwi will remain the highest for yield seekers for the next 50bps lower, which is likely to be neutral.
Trading strategy - Short GBP vs AUD, NZD, GBP in proportionate SMALL lots and add if higher:
1. Short GBPUSD @1.317 - 1.305/8TP1 1.290TP2
2. Short GBPAUD @1.713 - 1.693TP1 1.673TP2
3. Short GBPNZD @1.81 - 1.7910TP1 1.777TP2
I also like this strategy given the 3-way exposure net hedges any individual cross risk e.g. aud nzd or usd.
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