Observation: I notice that whenever the (12) gets to extremes (70 or 80) with price action the bars react wildly The same for when is goes to 40. This time NZDUSD is at 70 AGAIN, and it reacted violently.
Now, the plan is this:
Target#1: to sell NZDUSD to 0.7173, where I will take partial profits, OR set and alarm and see if the (12) reacts to the 40 level again if it gets there before the price gets there. I plan to sell all week to that level.
Target#2 is around 0.7100.
Where will this catalyst come from? The catalyst will come THIS WEEK in the GDT Index!
I think that the GDT Index will not be as great as in August: Be warned, the NZ economy may start to see a good economic outlook. Fonterra, the world's largest dairy exporter, based in New Zealand, forecasts higher milk prices this somewhere between this to to 2017 from $4.25 to $4.75/KG in New Zealand dollars (the time factor is so large a for us that it is meaningless: http://edairynews.com/en/fonterra-lifts-milk-price-forecast-as-global-glut-wanes-48411/).. This is one among many reasons why the New Zealand just cannot fall and make a lower daily low. But where is the price now? It was 19 in August..too high. This year $6 is already good (that's what some are fine with). So, that means it will fall from that high $19 price, right? It look like that to me.
So, I speculate that the GDT Price index must fall. You see? You just cannot pick up an economic calendar and look at positive or negative numbers. You have to think and anticipate its trickiness. Now, I could be wrong and milk prices continue to soar for some reason to $40? lol! I don't expect that...that's really too high, and not probable.
Now, what if the milk prices do come out lower in the GDT Index? I don't expect an all out crash and fall in the NZD, but that could put a damper on people's high hopes of yield. They are the ones who will "sell first" and think later. If they do, theb I favor a small move down to my smaller targets on the 4 hour chart and 2 hour chart. I don't think we will see a new low until we has a great catalyst. That catalyst MUST come from milk prices, and this is why I am highlighting it: Dairy is the leading export for New Zealand, and they have to make sales outside of their country to float well and grow economically. Do you see why this can affect this trade? In other words, whatever chat pattern their is..it can be further influence or break the pattern formed by the psychology of the NZDUSD market on the chart. If it comes out great, then that will lower the chance for a rate cut, and NZD will rally up. If my short position is right, the GDT price index would have fallen and down she blows!
There is NO Chart Pattern or price action that will tell you about the milk price on Tuesday. We must do the research ourselves and put the pieces together.
Do you know why there could have been a spike in NZD? EURO is going to attempt to reduce milk prices and make a deal with farmers and keep it there despite demand (but this will happen late this year): https://www.agra-net.com/agra/dairy-markets/analysis/policy/eu-agrees-milk-production-reduction-package-525262.htm . The farmers will " receive a payment for reducing output in a three-month period in late 2016 or early 2017."
Amazingly you can see that milk powder futures starting to slip: https://www.agra-net.com/agra/dairy-markets/markets/powders/daily-price-update-30082016-milk-powder-futures-slip-525248.htm
..and the unofficial GDT Price index has already fallen: https://infogr.am/gdt_price_index_change
So, ladies and gentleman, a short may be a good trade, but we need USD data to come out GOOD, but I predict that the Non-ISM coming out for the US Dollar will be BAD. Another catalyst that can help this short position is the G-20 meeting on Sunday and Monday. If it pushes the US Dollar enough in a bullish way, then that will be enough for this short trade.
If not... I will lose gracefully, as this is one of many trades, not the final story! Good night!
Update on the New Zealand Price Index: http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11703875
Ot hasn't come out yet, but this is good to read: https://www.globaldairytrade.info/en/product-results/