BNP Paribas G10 FX trade idea of the week: short NZDCAD

From the FXWW Chatroom: We think recent NZD gains are overdone. This week, the Reserve Bank of New Zealand meeting on 22 June could provide a catalyst to renewed NZD depreciation by striking a more dovish tone, even potentially some dovish rhetoric around the NZD.
Dairy prices have not risen in line with the NZD rally over the past month. If these milk prices show a decline at the Fonterra milk auction (20 June), this would likely put further downward pressure on NZD.
Our BNP Paribas FX Positioning Analysis indicates short NZD positions have been entirely squeezed out of the market, leaving scope for short positions to be rebuilt.
Our short-term fair value model STEER™ indicates that NZDCAD currently appears 3.5% overvalued given current short-term fundamentals. This suggests that NZDCAD is vulnerable to a sharp correction lower.

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