FxWirePro: Daily Commodity Tracker - 21st March, 2022 
In July 2016, in the article named, “FxWirePro long term outlook: Euro likely to decline 2800 pips to 1.28 against Kiwi”, available at http://www.econotimes.com/, we recommended going short on the euro against the New Zealand dollar at 1.556 area with a target around 1.28.
The first point, we would like to mention that the pair hasn’t moved as fast as expected. Instead, the EUR/GBP pair has moved much faster than our expectation towards the target. Nevertheless, we remain committed to the trade now, like we were before. The same fundamental remains active,
- Given the current circumstances, Kiwi is a better safe haven than the Euro. The new policies of the United States and Brexit would weigh more on the Eurozone than on New Zealand. Despite diminishing political risk premium in Eurozone, the election in Italy is a major risk that is currently being overlooked by the market.
- Moreover, we sense that there has been a major shift in the commodities, which were the best performing asset class last year.
- In addition to that, Kiwi's exposure to essential agricultural commodities makes it and the whole country (New Zealand) a better bet over the longer horizon.
- Moreover, Reserve bank of New Zealand (RBNZ) will remain more hawkish when compared to the European Central Bank (ECB). While the euro is being fuelled by speculation on ECB stance, one must note that ECB deposit rate is at -0.4 percent, while RBNZ OCR is at 1.75 percent. ( we are closely monitoring for changes, there might be a change in view)
- New Zealand’s biggest weakness as of now is weaker commodities prices which we suppose will recover over time and farms will be able to reduce their break-evens in the meantime.
- Kiwi bonds offer much better yields compared to the whole of Euro zone.
Anyone, who missed the call can still enter. Stop loss is at 1.65 due to current high speculation in the euro. The call is currently at the money.
