CommoditiesTrader

New Zealand Dollar Sets Up for Bullish Move

FX:NZDUSD   New Zealand Dollar/U.S. Dollar
The kiwi had a solid move against the dollar on Friday, gaining 1.14 percent. The move came as commodities rebounded, thus pushing up their respected commodity FX.

This was a response to the weaker dollar, but commodities saw their sixth week of capital inflows as traders deem a more risk-on approach in the medium-term. The move into commodities has been the longest in eight months.

The daily chart 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 bull flag or pennant .

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 EMA 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 EMA , price support would be sought out as downward targets.

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Comment: Kiwi getting hit on poor unemployment data: -.4% v . 4%

If price action closes below channel, downside targets in play.
Comment: CME Fed fund futures are implying the Fed will hike in DEC, but scratch the plain 25 bps move. Fed fund futures implying the Fed will increase by 50 bps - double then what was previously thought.

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!
the onset of inflation if downtrend line breaks
weekly downtrend line not broken yet
but there is a buying to push price above8/20 ema, a follow through will bring price closer to break out point
snapshot

besides, NZD is also commodities related after CAD & AUD, correct me if i am wrong

snapshot
+1 Reply
You're right in regards to the commodity FX. We seen the move in oil and CAD, etc. The only thing I doubt is the inflation. I don't think commodities rising by itself will create a whole bunch of inflation because I think that's countered by central bank intervention. If the Fed doesn't hike in December, I see these currencies crashing again.
+1 Reply
jangseohee CommoditiesTrader
raising the rate will cause the USD base commodities to crash aint it?
for example.. XAUUSD. raising rate means USD gets stronger, then gold goes lower.. how would the inflation happen then?
i am abit myopic here ^_^
+1 Reply
Well if the Fed hikes, then the cost of money increases. We could see that stifle speculation, and with global growth so low (and so many assets tied to the Fed's policy) it could get wonky. Now, traditionally a 25 bps hike wouldn't be a cause for alarm but the Fed has been near zero for about 7 years and has not hiked rates since 2006.

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.

+1 Reply
jangseohee CommoditiesTrader
that gives me a diff economic perspective, thank you ^_^
Reply
griffin1989 CommoditiesTrader
Iam looking foward to buying NZDUSD at 0.68695 to 0.74708, what do you think?
Reply
Iam looking foward to buying NZDUSD at 0.68695 to 0.74708, what do you think?
Reply
Terrific run there!
NZDCAD: MAJOR TREND REVERSAL.....???
Reply
moorekapital moorekapital
How the trade got refined ;)
NZDCAD: REFINING THE SETUP.
+1 Reply
CommoditiesTrader moorekapital
CAD has been strong on oil. Move fueled on speculation. NZDUSD has good weekly support, which it may try an retest. That's why I think it's important to not be confined too much to an idea if you're trading short term.
+1 Reply
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