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How to Trade on New Zealand's GDP Report

Monday, 11 Jul 2011 | 11:44 AM ET
Close-up of paper money of new Zealand
Stockbyte | Getty Images
Close-up of paper money of new Zealand

New Zealand is shaking off the economic effects of its February earthquake, and that's creating a trading opportunity.

The earthquake that hit Christchurch, New Zealand earlier this year was a doozie, and the New Zealand dollar certainly experienced some aftershocks. Now, though, New Zealand is poised to report some impressive economic growth — yes, growth — for the first quarter.

New Zealand is "starting to bounce back pretty dramatically" from the disaster, says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank. The first quarter GDP report "is likely to be strong and show an acceleration from the fourth quarter into the first quarter," probably in the neighborhood of 0.3 to 0.5 percent, she told CNBC's Melissa Lee.

Bourdeau expects the good news to lift the kiwi, so she recommends buying it against the euro. The pair has moved recently, so she suggests waiting for a bounce in the euro. Then she would buy the New Zealand dollar against the euro at 1.7250 with a target of 1.6900 and a stop of 1.7450.

Jens Nordvig, head of G10 foreign exchange strategy at Nomura Securities, sees some other potential support for the New Zealand dollar. The Chinese central bank, he says, "might actually be buying kiwis themselves." It's important to watch the moves of the big central banks in the currency markets, he says, adding, "I think the kiwi is getting more and more interest from big central banks."

As for technical data, Todd Gordon, co-head of research and trading at Aspen Trading Group**, says he likes the idea of taking profits on the trade at 1.6920. "Be quick to take profits because this trend is just about exhausted," he says.

The Money File
Cashing in on next week's New Zealand GDP report, with CNBC's Melissa Lee and the Money In Motion traders.

You can watch the whole discussion right here.

**Aspen Trading Group is short USD/SGD and USD/CHF.

Multi Currencies vs the Dollar

left/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__ICONS/icon_story_360_TV.gif1505000lefttruehttp://msnbcmedia.msn.comCNBC 360 TVfalse1PfalsefalsefalsefalseCNBC TVTune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

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