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Money Matters
- USD/JPY and JPY crosses - is this the retirement trade?
- NZD/USD - No one's talking about it!
- NZD/AUD - Sunk by back-to-back poor NZ data
- Update - the Graveyard - USD/JPY
- USD Pairs - All lined up?
- The Canterbury Rebuild (and NZ monetary policy)
- Systematic trading (avoiding the BIG losses)
- EUR poised for higher
- NZ GDP Comment
- NZD/USD - Doing all the right things
- View archive...
Money Matters
Viewing entries tagged with 'NZ'
USD/JPY and JPY crosses - is this the retirement trade?
All
The USD/JPY has attained the state that I refer to as ‘trending’. Price pushing up hard and fast against spaying Bollinger Bands . The ‘morning star’ rejection of lower levels that I documented on the 10th of November has been a wonderful indicator.
From observing this technical state in the past I’ve noted that ‘pullbacks against the trend can be quite sharp but they are usually brief by time’ (24/48 hours).
This pair, in my opinion has been incredibly depressed for a number of years, and it could really fly going forward. Why not 100+?
For a bit of perspective (and showing my age) this pair was at 250.00 when I started in FX and had been at 360.00 in the late 1960’s.
USDJPY – click here to view chart
What about Gold (the store of value as central banks globally attempt to inflate their way out of trouble) versus the JPY? Check the 1 year consolidation break out!
XAUJPY – click here to view chart
And NZD/JPY ? The Christchurch rebuild will make NZ’s economics look unlike any other western economy and on the other side of the ledger Japan’s problems (which I’ve documented many times recently) undermines the JPY. 100 on this cross anyone?……………………….and you get paid to hold it!
NZDJPY – click here to view chart
A trade weighted type portfolio of each of these pairs may be vastly rewarding going forward.
G.
NZD/USD - No one's talking about it!
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.
NZD/AUD - Sunk by back-to-back poor NZ data
All
I have been a fan of NZ’s prospects over that of Australia in recent times given the Canterbury rebuild and a number of droughts around the world keeping NZ’s soft commodity prices elevated compared to that of Australia’s hard commodities. The strategy has given a couple of nice runs higher to trade on the NZD/AUD cross but recent data has abruptly turned that around.
Today’s very weak Retail Sales data, coming hot on the heels of the shocking 13 year high in NZ Unemployment, may see built up long NZD/AUD positions liquidated in coming sessions.
My modelling analysis worked very well today capping the recent bounce in the cross at 0.7860 versus the model sitting at 0.7870/92. The model is splayed wide which is suggestive of a strong move underway and the readings are dropping very quickly. That means selling NZD/AUD around here may have its risk mitigated very quickly, say within 2/3 days.
NZDAUD – click here to view chart
The daily chart is suggestive of a forthcoming test of one year support at 0.7745. A break of that level could get very ugly indeed.
NZDAUD – click here to view chart two
No one expects that the RBNZ will need to cut because they think the boost from Canterbury will be ‘real’ in the RBNZ’s own words but if the world sinks a little again, we get another decent jolt delaying the rebuild.
Cheers G.
Update - the Graveyard - USD/JPY
All
This trade is progressing slowly but surely. To recap, the bones of this trade are;
# The 30 year run of trade surpluses has now turned to deficits as the Japanese turned off their nuclear power stations after the Tsunami inspired Fukushima disaster. As a result the Japanese now import the vast majority of their energy requirements.
# Japan’s demographics are poor with the population forecast to decline to 90 mio by 2055 from the 127 mio peak in 2004. Those citizens that are left will be much older too.
# The Bank of Japan has set forth on a new round of monetary policy easing. Top Japanese research house Nomura have been widely quoted recently regarding the new policy saying that the “JPY is likely to weaken due to the BoJ becoming more proactive as a result of likely changes in government leadership as well as changes at the Japanese central bank in coming months.
# …and the budding theme that we here at Edge Capital are watching with great interest is the vast supplies of cheap energy (shale gas) that the U.S is currently harnessing. We think this could be a major kicker for the U.S in coming years. Cheap currency and super low interest rates have been prevailing for 5 years now, add super lean business organisations and top it off with cheap energy. That should be one tasty cake when baked.
USDJPY – click here to view chart
P.S. Got to love NZD/JPY on this basis too !
Cheers G.
USD Pairs - All lined up?
Hi All
I note a number of currency pairs against the USD are all poised neatly below short term resistances. After a long period of (boring) consolidation I wonder will these levels hold once again, confining us to familiar ranges, or are we on the cusp of a break out and a decent trend?
I still expect a resumption of USD weakness on the basis of, all other things being equal, that QE3 will weaken the USD just as the prior installations did. Also I expect Chinese PMI’s out tomorrow to confirm that the worst is behind for the Chinese economy.
I will be buying these pairs (on strength) on a 1 hour hold above the seemingly co-ordinated trend lines.
G.
Fig 1 – NZD/USD
NZDUSD – Click here to view chart
Fig 2 – AUD/USD
AUDUSD – Click here to view chart
Fig 3 – EUR/USD
EURUSD – Click here to view chart
Fig 4 – GBP/USD
The Canterbury Rebuild (and NZ monetary policy)
All
On Friday, following the previous day’s OCR, I had a catch up with the Head of Forecasting at the RBNZ.
The price action suggested that market had seemed somewhat confused by what the OCR review and the Governor’s maiden speech on Friday morning was telling them. The OCR was perceived as hawkish while the speech, some 24 hours later, elicited a dovish reaction.
Amongst many things discussed came the statement that the RBNZ viewed the rebuild as ‘real’ and for me that statement is really the kicker given the last paragraph of the OCR statement…
| ”While annual CPI inflation has fallen to 0.8 percent, the Bank continues to |
| expect inflation to head back towards the middle of the target range. We will continue to |
| monitor inflation indicators, such as pricing intention and inflation expectation data, |
| closely over coming months. |
What they are saying here is that they expect inflationary pressures to come out of Canterbury as firms compete for (tight) labour and materials and that they are watching closely.
For a gauge on the timing of any such effect I thought this graph in this week’s ANZ’s Market Focus was interesting.
Ready-Mixed Concrete Production – click here to view chart
The chart clearly suggests that building activity died in Canterbury the year after the quake (as you’d expect) but now the rebuild is becoming FULLY UNDERWAY.
Cheers G.
Systematic trading (avoiding the BIG losses)
All
Over the years I have developed structure around my trading to avoid waking bolt upright, in a hot sweat at 3.00am wondering if my trading account has been destroyed. Trust me, I’ve had too many of those occurrences early in my trading career and they are to be avoided.
The market is never the most rational of places to risk your capital and strange short term moves always occur. With that in mind I thought last week’s action in the NZD/AUD would be a great example to document.
The method I employ now for my FX trading is for example, that if I am bullish, I will stay long whilst the price action is above a couple of shorter term moving averages. In effect this method is beneficial in two ways, one it creates a point to place my stop loss orders and two it avoids me ‘falling in love’ with a position (We see the pitfalls of trading through the actions of so many trading clients and one thing that often crops up is that the more a client believes in a trade the more likely it is that big losses will occur because the trader thinks his view MUST eventually happen so he won’t let go of the idea when wrong).
I’ve been long NZD/AUD from 0.7730 as I have been particularly opinionated about the prospects for this cross for many months now. My short term moving averages guided me to have my stop loss working at 0.7795. The unexpected happened early last week with a billion dollar flow from one of the local banks repatriating profits back to their Australian parent – the cross fell (alarmingly, to me !) triggering my stop loss order. Whilst obviously disappointed I knew the trade wasn’t necessarily over because, as the moving averages were still pointing up I needed to place a stop entry order above them to return to the trade should the price action reclaim the ‘model’.
Sure enough the big flow only had a fleeting impact on the trend of this cross rate and I was soon knocked back into being long.
NZDAUD – click here to view chart
Thus as it panned out I was cut from my long at 0.7792 and returned to the trade at 0.7818. So whilst annoying, the wash up means that I have only missed participating in 0.0026 points of this uptrend whilst avoiding the potential for a much bigger loss (it’s the big losses that see traders ruined). And importantly this trade still looks like it has much further to run with Australia likely to cut rates sometime ahead whilst NZ remains firmly on hold.
There’s two obvious ways to trade the market, get on the ‘rich list’ so that you can cope sitting on offside trades until they ultimately come right, or for mere mortals, trade systematically with appropriate risk profiles and watch your trading account slowly build, avoiding major losses along the way.
Avoid the hot sweats, talk to me and learn how.
G.
EUR poised for higher
All
Base case is that the (almost co-ordinated) central bank actions of the last few weeks support the market like the previous QE programs have.
Under that scenario we would then expect to see ‘risk’ higher.
EUR/USD moved strongly higher in anticipation of the FED and ECB programs so I view this 8 day pull back since the announcement as nothing more than a profit taking correction (buy the rumour, sell the fact).
Yesterday the EUR/USD appears to have reversed (key day reversal – lower low, higher high and close) and the 8 day gentle downtrend appears to have been broken to the top side.
This should be an important indicator for all pairs against USD suggestive that we will see NZD, AUD, GBP, Gold and Silver all (significantly?) higher in coming weeks.
Fig 1 – Daily EUR/USD chart
Daily EURUSD chart – click here to view
Fig 2 – A closer look at the downtrend line via the hourly chart
Hourly EURUSD Chart – click here to view
The last confirming level to cement my view will be if/when the EUR/USD lifts above my model level which is currently falling mildly at 1.2965.
Cheers G.
NZ GDP Comment
All
I thought this line from Dominick Stephens, Chief Economist, Westpac, is potentially very telling.
| ”New Zealand is going into a bulge of stronger GDP growth |
| fuelled by the Christchurch rebuild. It won’t be sustained in |
| the long term, but it’s got a wee while to run yet before the |
| rebuild peaks in 2014/2015. |
I’m very bullish on the NZD’s prospects against all comers.
A seasoned Corporate Treasurer I know well went to a presentation by the RBNZ two weeks ago, and the takeaway from that was, the RBNZ’s believe the export sector is actually holding up very well in the face of current exchange rates. Further, the treasurer said that the RBNZ’s message was consistent with the anecdotes he was hearing from around the country as well. Now the GDP data confirms.
Given the 3 year bulge of growth that the Christchurch rebuild will add, NZ data is going to look very different from the rest of the developed world for quite some time.
Anyone for NZD/AUD at 0.8800, NZD/JPY at 100 ?
Don’t let your thoughts be bogged down by old norms.
G.
NZD/USD - Doing all the right things
All
I have a technical suite of indicators that I follow very systematically these days. Within my recipe the NZD/USD has been absolutely PERFECT today.
Fig 1 – NZD/USD Daily chart. Kiwi broke the 1 year consolidation triangle back on 11 Sept., rose, and has been consolidating since.
NZDUSD Daily – Click here to view chart
Fig 2 – Short term NZD/USD chart. Shows a perfect ‘strong GDP’ inspired outside range up hour, right out of my proprietary model. PERFECT!
Short term NZDUSD – Click here to view chart
Trade is to be long of NZD/USD with a stop loss at 0.8225
THIS IS AN OUTSTANDING OPPORTUNITY IN MY MIND. NZD/USD to 0.9000 anyone?……there’s this little fundamental thing going on called QE3 (QE Infinity) that might just weaken the USD.
Cheers G.
