About AUDNZD and Patience


RELIGION - It's always nice to see when something comes along that you've been waiting patiently for. When trading markets, exercising patience is critical and should be treated like religion. If you find yourself at an impasse and are trying to decide between impulse and patience, always go with patience. Sometimes you will see something and there won't be any doubt. The opportunity will come racing along and jump in front of you out of nowhere. And when you see it, there will be those times where you need to act quickly. But for the most part, it's about patience, patience and more patience. The market doesn't like patient people because it sends a message that you are the one dictating the terms and when in a negotiation, you always want to be in a position to dictate the terms.

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THE WAIT - The reason this comes up in today's update is that I have been very patient with AUDNZD over the past several days and arguably, even a lot longer than that. As many of you know, AUDNZD has been a fantastic trade for our portfolio over the years. I can maybe recall one time where we were on the short side of this trade, with an overwhelming majority of the profit made playing this from the long side. But for quite some time, the market was trading up at levels where that next trade wasn't there and in recent days, we slowly started to pull back, with the drop finally getting my attention again. But even then, it was tough to watch as I was excited to see if the trade would in fact set up. I highlighted a great support zone in the 1.0800s and sat back to watch. On Monday, after a long wait, the opportunity finally came.

Whenever you are unsure and there is a decision between impulse and patience, always go with patience.

THE TRADE - The New Zealand Dollar shot out of a cannon on Monday, though the reason behind the move was a little strange in my view, with the market attributing the demand to the appointment of a new central bank governor. It's clear the appointment of Adrian Orr is a positive development, with Orr coming into the position with a resume that should give the market every confidence he will be able to a good job. But in truth, the rally on this news seems a little much to me and if it is on this news, I think this would be reason enough to be fading the Kiwi move and buying AUDNZD into the dip. There were also some comments from New Zealand FinMin Robertson that may have helped, but again, it all seems strange if these are the reasons behind the move. Ultimately, I believe the AUDNZD rate is in the process of rounding out a longer term bottom and see the greater risk over the coming weeks and months for a much bigger move to the topside. I have always given this trade room to breathe as it can chop around, but I am very excited to have waited for it and to now be back into the position.

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