Tuesday 27 October

We've not had much market moving news so far this week. A lack of Middle East escalation has been greeted positively, although it is a tentative positivity. All in all, it seems the market is waiting for Wednesday's barrage of events before committing to a direction. Although sentiment for the EUR remains subdued and I would suggest EUR short trades have been a viable opportunity so far this week. Coming up, we have the RBNZ. Sentiment for the NZD has picked up recently as least one more hike is being priced in. Will the RBNZ decision create an opportunity? Possibly, the consensus scenario is a hike creating a strong NZD, in which case EUR NZD short is clear choice. My issue with that is how stretched EUR weakness is already. And given that ‘price movement’ in general could be a bit flat ahead of Wednesdays other events. It might be that a hawkish RBNZ hike is best left to wait for a pull-back. Then once the other bank decisions (BOC, FOMC) and mega cap earnings have passed, NZD long could be the trade. Alternatively, rather than a ‘hawkish hike’. The RBNZ ‘could’ offer: A) No hike B) ‘dovish hike’ And I actually think that (particularly a dovish hike) is likely to weaken the NZD and potentially create a AUD NZD long. Although I think that's the most unlikely scenario, I would have quite a lot of confidence in AUD NZD long following a dovish hike, as recent NZD positivity unwinds. As ever, anything can happen. All we can do is form an opinion on potential outcomes and react according to what the market thinks. Please get in touch with any questions: johnelfedforexblog@gmail.com