TD Securities: Sell EUR/NZD

Late Tuesday saw TD Securities note that “the market has recently gotten very excited about the prospects of the ECB pivoting on its rate outlook, underscoring the scope to hike later this year. That has generated lots of interest in the declining levels of negative-yielding debt, which have dropped about 70% off the highs. While we think the ECB pivot is quite crucial for anchoring the floor of the EUR, the sequencing seems a bit off. EUR/USD likely has one leg lower ahead of Fed lift-off, with our HFFV framework pegging it around $1.1250. At the same time, EUR/NZD is one of the most mispriced trades in the G10 (besides AUD/JPY, which we're long). Based on our dashboard, the pair sits at the most expensive levels seen in the past few years. Finally, our currency overlay scorecard maintains short exposure to the cross, reflecting a mix of market and macro factors.”

• They added a short EUR/NZD trade idea to our model portfolio, entering at NZ$1.7200, targeting NZ$1.635, with a stop at NZ$1.7730.