NZD/USD - No one's talking about it!

Posted by Graham Parlane on 16 November 2012

All

I’m amazed that there is so little chatter around the potential for a really stiff NZD/USD fall. Has the recent lack of relative volatility lulled the market into complacency?

Sharply falling global share markets, rotten local employment and retail sales data and our closest (and biggest) trading neighbour is in the midst of an interest rate cutting cycle and I’m not seeing terribly much interest to sell. Nor am I seeing much chatter on the wires regarding the possibility of a big fall. AMAZING!

Here’s an overlay chart of NZD/USD (in yellow) and the Dow Jones Index (in black). Since the GFC the two instruments have been highly correlated but look at the magnitude of the Dow fall comparative to that of the NZD in recent weeks.

The NZD/USD has been viewed by most as being somewhat overvalued for quite some time now, certainly departing RBNZ Governor Bollard fired a parting shot at the U.S. and the FED’s policies which keep the USD depressed (and as a result overvalue the likes of the NZD). I’m hearing the farmers have their cheque books firmly closed at present which doesn’t help. Is the Q3 in NZ just a soft blip or something more, is the USD ready to roar……..no one knows of course but the sum of what we do know right now suggests the kiwi may have quite a bit further to fall.

NZDUSD – click here to view chart

G.

Tags: Broker, CFD trading, CFDs, Equities, FED, Foreign Exchange, FX, FX trading, NZD, NZDUSD, Q3, RBNZ, Trader