Long NZD/USD Included In New USD Short Recs From Citi

Wednesday saw Citi note that “after a strong USD rally in February, we saw a sharp reversal in the USD following very strong China PMIs. With the Chinese NPC also around the corner and the possibility of softening in U.S. labour market data, we look for tactical downside in USD against high beta currencies, such as NOK, NZD and CAD.”

• Specifically for NZD, they added a long NZD/USD position at $0.6250 with a target at $0.6538 and stop loss at $0.6131.
• “With the positive surprise from Feb Chinese Manufacturing PMI yesterday, we see strong upside potential in NZD/USD. NZD is seen as one of the currencies that have high sensitivity to Chinese assets, and indeed, NZD saw the highest beta to CNH since the USD rally began in Feb ’23. With the USD expected to take a sharp reversal and USD/CNH already ~1.6% down from the peak, we think NZD/USD has a solid ground for a rebound, especially with considerable short positioning from leveraged clients looking likely to be reversed. In addition, we don’t see a short-term catalyst that could move RBNZ pricing materially lower and note that RBNZ has been persistently hawkish with upside risks introduced to short- and medium-term inflation from the cyclone.”