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#SaxoStrats - NZDUSD to bounce on China move

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Saxo Bank's Head of FX Strategy, John Hardy, oulæine shis latest #SaxoStrats trade: "The initial push was to sell all Asian currencies on the announcement of the Chinese yuan devaluation. But on Day 2, we’re seeing signs of the market reassessing this trade and buying almost everything versus the USD, which is the biggest loser on the CNY move because of the implications for a more dovish Fed policy." 

The technical reversal in NZDUSD this morning offers a compelling setup for testing whether the USD will continue to weaken on this new development.

Management and risk description

The risk to this trade is weak commodity implications sees commodity currencies weakening again or China suddenly halts the revaluation soon, sending the USD back higher.

Parameters

Entry: 0.6550-75.

Stop: 0.6505.

Target: 0.6740 and then 0.6840.

Time horizon: One week.