FXStreet (Barcelona) – Adarsh Sinha, FX Strategist at BofA-Merrill Lynch, maintains a short position on NZD/USD, targeting 0.67 levels with clear downside risks to the forecast.
Key Quotes
“Ultimately the precise timing of the next cut matters less for our NZD view than the RBNZ’s overall message that it needs to ease further. We expect the NZD to remain under pressure over the coming months and maintain our long held forecast for 0.67 vs the USD this year, with clear downside risks to this view. We stay short via a NZDUSD put spread (Short NZD/USD 11 May 2015: current level: 3.70%, entry: 1.18%).”
“There is some evidence that short NZD positions are becoming stretched – in particular, CFTC data show the largest short exposure on record, while our residual skew measure suggests shorts are at extreme levels. This could certainly lead to a short squeeze in NZD at some point, especially if the RBNZ does not cut in July. But any rallies above 0.70 would be good opportunities to scale into short positions in NZD on the view that the RBNZ’s policy divergence will persist over the coming months.”
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