Sidestepping a crotchety market – SocGen

By FXStreet Research Team at Societe Generale, suggests that the G20 meeting in Shanghai served up little else apart from soothing words.

Key Quotes

“Hard economic data has not deteriorated to the extent that we should expect global coordinated stimulus soon. The week though has opened to news of the PBoC’s 50bp RRR cut and renewed European deflationary pressures, reminding us of the uncertain global macro environment.

There has been tentative improvement in global risk sentiment over the past fortnight, but markets remain crotchety. The yen has been the top performing major currency in February. Yen positioning has grown enormously over the past two months as a consequence, and has currently reached pre-Abenomics levels.

CAD/JPY should do well if risk sentiment continues to improve in coming days. But for those looking for more risk-neutral RV trade ideas, we see upside potential in AUD/NZD. AUD/NZD has traded sideways for several months, but it appears to be building a base for a more durable climb higher. Buy AUD/NZD at 1.08, targeting 1.14 with a stop at 1.05.

After an overstretched lurch towards parity just over a year ago, AUD/NZD is showing signs of stabilisation as it traces out a broad inverted head-and shoulders pattern. The downtrend since 2011 …read more

Source:: FX Street