The risk bias to Antipodean currencies remains firmly to the downside here onwards in 2016. The prospect of lower Chinese growth and weaker commodity prices, the risk of a more aggressive tightening cycle from the Fed as supply side constraints bind and the possibility that the EM deleveraging process intensifies are all conceivable headwinds to both AUD and NZD in the year ahead.

We think AUD/NZD remains in a broad 1.05-1.15 range, but that risks are biased towards a move towards the top of the range by mid-2016. We expect that rate differentials and relative commodity price performance will be supportive for the cross in the year ahead.

Antipodean vols are likely to lift modestly (2M ATMs around +1 point) in H1 of 2016. Own gamma heading into the Fed cycle and sell risk-reversals preferentially on spikes.

Hold 15D At-The-Money 0.50 delta call and simultaneously hold 2 lot of 2M At-The-Money -0.50 delta put options. Huge profits achievable with the strip strategy when AUDNZD exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move. The profitability can be maximized for every shift towards downside and this is not the same on upside.