Interview March 2015
WAITING FOR A BOTTOM - Still no bottom in AUDNZD just yet. Another drop to a fresh record low on Monday, with the market dipping below 1.0200. I did buy some more on Monday and now have an average cost at 1.0215. I won't be doing anything else for a while now and will just sit back and watch. Granted, I had expected we would be a good deal higher at this point in the year. But at the same time, I have caught some nice moves to the upside this year and have made money on the long side of this trade despite the ongoing declines. At some point soon we should put in a material base, though a move to parity should not be ruled out. I would only grow concerned with this trade if we saw the market attempt to establish below parity.
WHY SO LOW? - So what's been causing the latest slide? If you look at price action in markets on Monday, the one key standout was the drop in iron ore prices, which correlate with the Australian Dollar. Iron ore prices sank to fresh 6 year lows and this weighed heavily on an Australian Dollar that was already pressured from a resurgence in broad based US Dollar demand. The other contributing factor to the AUDNZD slide was a rally in the stock market, with the push back into risk helping the correlated NZD. Still, this chart is far too compelling in my view and I continue to feel very good about the prospect for a bottom and bullish reversal. I think the RBNZ has plenty more room to shift towards accommodation and will need to catch up with the rest of the central banking world that has been in a race to see who can have the lowest rate.