This was a response to the weaker dollar, but saw their sixth week of capital inflows as traders deem a more risk-on approach in the medium-term. The move into has been the longest in eight months.
The has formed a “cup and handle” pattern. Typically more consistent on the weekly chart, but price action has been able to form a rounded bottom which coincides with weekly price support.
The handle is formed as price begins to fade upward momentum and can resemble a or .
If NZDUSD can close above .6770, the pair will likely break out of the downward consolidation (shaded box). Traders’ risk sentiment will fuel either the run up to the 200-day near .7000, or cause the kiwi to trend lower to price support of .6638 – at this point the subjective pattern could show signs of breaking down.
If the pair does close below the 50-day , price support would be sought out as downward targets.
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If price action closes below channel, downside targets in play.
Yesterday the probability for a 25 bps move was 47%, today its 41%
Yesterday the probability for a 50 bps move was 52%, today its 58%
Dollar is surging!
This is an interesting read: http://www.project-syndicate.org/commentary/fed-monetary-policy-tightening-risks-by-j--bradford-delong-2015-08
In those four attempts to tighten policy, a recession followed and sharp declines in equity prices. Raising rates would be troubling for commodities because it effectively strengthens the dollar, which is still roughly 20% stronger within the last year. And, that is will only the promise of a rate hike but no hike itself.
Gold is interesting because it is often, but wrongly, repeated that if the dollar goes up than gold must go down as if it was completely inverse of each other. However, according to the World Gold Council:
Historically, gold prices more than double on a weak dollar than it falls on a stronger dollar. Thus, a stronger dollar is not indicative of massive gold depreciation. When the dollar declines, gold has appreciated 14.9 percent. Yet, when the dollar strengthens, gold has only fallen by 6.5 percent.
Much of gold's downfall has been due to the market's perception that growth with inevitable reach escape velocity and all we be well. As we're finding out, that's not the case. I expect gold will fare nicely in the next 3-5 years as part of a well rounded portfolio.