Pride and Parity. Which will be first? Which will take a fall?

With the Cricket World Cup nearing the quarterfinals and the Aussie and NZ dollar with only 4 cents apart, it is hard not to come up once again with sporting and trading metaphors.  It is after all a TWP speciality!  

This particular comparison is geared around Parity, where I draw upon analogies with the once unthinkable pending equal valuation of the Aussie and Kiwi dollars and the current and very topical debate of the strengths and weaknesses of our respective national cricket teams.

The recent epic cricket match at Eden Park was concrete proof how “close” the New Zealand and Australia teams are.   I am sure there are many of our newsletter readers that are openly wishing for an ANZ cricket final in Melbourne. So perhaps at the time of writing the Kiwis have the edge with regards to the cricket with one match up on their infamous archrivals and Australia have the currency edge still, but only just.

It should be noted at this point, and as many TWP followers will know I am Australian!  And like many of the TWP team, I am very passionate and patriotic about sport! This, of course, leads to many heated trans-Tasman debates with my equally passionate and patriotic Kiwi colleagues! 

I am also a Forex Trader so currently the possible equivalence of the Australian and New Zealand dollar is foremost in my thoughts along with the cricket naturally.

I am also fully aware that many of my Kiwi mates are forecasting a New Zealand victory for Cricket World Cup.  I do remind them, as it appears they are experiencing some select memory loss, that Australia had won this particular large and shiny golden ball 4 times previously.

But when it comes to forecasting the actual parity of the AUDNZD, that’s an entirely different matter.

So now I am coming out into cyberspace via this newsletter with two calls!

And they are BIG calls…

1. New Zealand will NOT win the Cricket World Cup.
2. The Australian dollar will be at PARITY with the NZD before the end of the Australian Financial Year

It is all well and good to have the usual Aussie/Kiwi bantering about sport and we all know that we soon become united should either of our beloved teams end up in a final, dare we say, with another Commonwealth country! It is a different scenario with trading, this is a serious matter and we should not be led by the same emotions as our sport egos can sometime take us.

With the demise of the mining boom that propped Australia up through the dark days of the GFC and beyond we are now seeing a depreciation not experienced against the NZ Dollar in recent history. This is great news for you if you wish to holiday in Australia as your dollar goes further, it is also great news for importers of Australian goods. So whom does this changing exchange rate hurt? Exporters from NZ that see most of their trade with Australia are feeling the pinch at the moment as we have seen the NZD climb steadily against the AUD since the peaks in March 2011. As far as economic trade goes Australia is New Zealand’s biggest trading partner.  The Aussies exporting to NZ on the other hand are quite enjoying this situation, as are the New Zealand importers.

But back to Trading the markets, when we trade we put our money at risk. When we talk about sport the only risk is our pride taking a fall and maybe having to eat humble pie with a mate across the ditch! As someone that has traded the markets for a number of years and worked with, and been mentored by some really world-class traders, I know that emotions and ego more often than not cost you money. They certainly do not make you money!  So when it comes to trading, being patriotic won’t help you at all. Any desire to beat Australia or New Zealand in sport is fair and honest play. When it comes to the market if you let ego and patriotism get in the way of your decision making process then I am afraid it will quite possibly end in tears.

Right now as the parity debate heats up and the World Cup heads into the quarterfinals I see parity as a far higher probability that a New Zealand World Cup win.

Regards,
The TWP Team