Short NZDUSD based on low CPI/ inflation = an RBNZ OCR cut is 90% likely
- 105 mins after market open at 23:45GMT NZD releases their June CPI print.
- In all RBNZ mandates they reiterate how they consider CPI to be their "main/ sole" target or dictator of the monetary policy they set (check any of their minutes etc).
- Their target is 2%, plus recently they announced that they would hold an "emergency"/ brought forward economic assessment (this lead to increased short bets on NZD$ at the back of last week (with NZD$ falling from 0.733 to 0.710) as many speculated that this meant the RBNZ has a heads up on the CPI print - e.g. its bad).
- In simple terms if CPI fails to grow on the quarter for NZD e.g. 0.4% or has in fact fallen e.g. 0.3% or less - it is highly likely that the RBNZ will cut their OCR rate, in order to boost the CPI, which in turn will send NZD$ likely to a terminal rate of 0.67 (could be as much as 0.65), hence why last week we saw shorts increase on the pair as fast money tries to front run the market/ print.
Trading Strategy - Short NZD$ if CPI print misses or equals 0.4% - Stagnant/ low Inflation = RBNZ OCR cut likely:
1. Personally I dont have any interest in playing the long kiwi$ side e.g. if the print is higher as; 1) the RBNZ isnt happy with NZD trading so well (due to its deflationairy pressures), so action could come to reduce the NZD. 2) There is approximately 300-400pips of downside from here (at least) if a RBNZ OCR cut comes, whereas a no cut will likely see NZD$ Drift to 0.73 (maybe higher) so the risk:reward complex isn't as attractive to the upside IMO.
2. I will be waiting for the CPI print at 23:45GMT - if it is lower or equal to 0.4% I will Short NZDUSD 2lot@market price; 0.68TP1 0.67TP2 0.65TP3.
3. This trade is effectively betting on an RBNZ OCR rate cut; See attached posts for more details but this is already highly likely - and IMO is a definite if CPI is 0.4% (even more so if it is lower). Ideally id love to see 0.3%.
- The rate cut is ranked likely if CPI comes in at 0.4% or less because 1) Inflation is the RBNZ key target, so stagnation is what they have to avoid - a rate cut is the likely tool they'll use given they have one of the highest CB rates in the developed world; 2) the NZD dollar is very expensive across the board and the RBNZ have communicated their dismay regarding the strength of the currency (e.g. saying its very strong/ causing disinflationairy pressures) - so a OCR cut is also the likely response if the RBNZ wants to depreciate the NZD dollar against all of its trading partners; 3) An OCR cut will ease any of the Brexit Commonwealth Headwinds that may or may not drift into NZD's economy of negative impact - so as these 3 reasons are compounded I believe an OCR cut is made ever more highly (80-90%) likely thus bearish bets against NZDUSD make sense to me from here.
3. This CPI trade, if comes in on target (0.4% or less), is also good as LDN and NY session's will have 8-14 hours until they start - so you will be able to get ahead of the market/ mostof the largest FX flows. Though the Asia session will be in full swing so dont expect an easy ride - IMO fingers should be on the trigger to execute the short immediately if 0.4% or less is seen - NZDUSD will likely drop 200+pips in less than 30seconds if these figures are the case (if not even quicker).
Any questions or comments please ask - reading the "sell nzdusd @0.73 - tp 700pips" post ive attached helps support this short Kiwi$ trade
Comment
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There shouldnt be any real NZD buy flows on the back of the flat inflation, yet the downside was mild (much less than i expected given the implications this inflation reading has).. only positive for NZD im seeing at the moment is that risk is trading welll which usually means NZD has a better bid.. wait and see, my advice to shorts keep SL tight, get a re-entry at 0.73 if the market wants to give us one lol
One reason why it may have had limited impact is 1) the 200pips of pricing from the "emergency meeting" that inferred the low CPI reading already priced it in down to 0.71; 2) risk markets trading well atm; 3) LDN/ NY money hasnt been seen yet; 4) still 3.5wks out from the meeting.
Intraday pattern players are seeing a NZD buy pattern. We may see nZD struggle around the 200ma on the H4 and the 100ma on the WK before it decides to go down. So, you're right. We need some heavy players from London or NY.
QuantumLogicTrading
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yh but there shouldnt be any real NZD buy flows on the back of the flat inflation.. only positive for NZD im seeing at the moment is that risk is trading welll which usually means NZD has a better bid.. wait and see, my advice to shorts keep SL tight, get a re-entry at 0.73 if the market wants to give us one lol
dead2live
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Most traders ignore fundamentals, believe it or not. It takes them a while to figure out something else is happening outside of their patterns, believe it or not. I'm amazed that so many don't consider the major moving averages, too. I've yet to study harmonic patterns for this very reason. I may only do so to keep up with what intraday trader are doing. It's one of my edges, I suppose.
QuantumLogicTrading
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This isnt true at an institutional level.. Apart from Algo/ HFT funds most of the real money (HF/ AMs) are fundamentalists.. You can tell by how NZD$ has been moved up and down by RBNZ rhetoric in the last 2wks that this is the case e.g. the article in the post moved us down to 0.71, then the housing inflation comments from Gov Wheeler from RBNZ moved us higher the wk before.
Pure "technical" is only done by retail level people.
dead2live
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That's what I mean. Sorry to confuse. I mean "most retail traders" use technical. Once the retails get washed out .. you know how it goes.. Perhaps the institutional do this intentionally. That much I haven't experience with. it's fun to watch and learn, tho.
sometimes my trade seems to go an odd way, so I pull up a retail technical (like bolinger bands. they're crazy for bolinger bands) and I see the technical signal. I just ride out their movement. LOL
dead2live
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Please see the house rules and ensure you follow them. Be certain not to be disrespectful of other traders of which there are a plethora who trade solely upon technical and who use tradingview. I will not report you. Your comment is border line. But I did view everyone's post via the chat room and it's one reason why I suggest to my trading friends to avoid tradingview if they cannot refrain from its social aspect. The amount of disrespect and hate on this site is absolutely unbelievable. But good traders, wise traders, that I know assure me that adaptability, moderation of everything involved in trading from technical to fundamentals are important for a well-rounded experience that is a catalyst to sustainable trading methods.
I do appreciate your time, but since you are disrespectful of other methods of trading, I will not be following you and, of course, will not bother you any more.
Be well.
QuantumLogicTrading
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theres no disrespectful/ respectful methods to trading. Im simply telling you the methods ive seen in industry and it isnt technical analysis. Funds can't execute billions of USD in risk based on a moving average crossing another moving average (MACD) or because a line is "high" releative to previous times (RSI). They have to have sound reasonings as to why they are executing risk.
If you dont understand that, you should learn. I've been in industry for 2yrs and never saw a ANY executions made on technical analysis by either the guys at my shop or buyside clients.
if you take it personally then i cant argue with that - dont patronise me with "see the house rules and follow them". You commented on my post, i didnt comment on yours. I didnt even knew you/ looked at any of your charts before you commented, so if you didnt like it why comment? Yu should have just moved on, no need to try and act all high and mighty about "house rules" ive done nothing wrong. Simply stated real life facts - it may hurt, but its the truth.
dead2live
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2 years is not a very long time. Be well.
QuantumLogicTrading
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2yrs longer than yourself and most. 250 days x 12 hours x 2 = 12,000 hours of knowledge from a top sell side bank. Pretty much all there is to know. Like I said, dont be angry when people try to teach you/ offer REAL advice. Most people on here havent had one day in industry, im trying to pass on what i know/ help people from losing money. If you dont like it, like i said, dont look.
You can tell by the effort that i put into these posts that im serious. I dont see anyone else breaking fundamentals down like i do, not to be big headed but its true. Most others dont know or understand it.
dead2live
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I implore you to re-read my comment without your ego attached. Nowhere did I write "your fundamentals suck!" nor "You're an awful trader!"
You're reading into it and arguing with yourself.
I sincerely appreciate your attempt to "teach" me in order to be a better trader. I have friends that are ex institutional traders with a minimum of 25 years experience; 65 years combined. Thus, I don't need your help. I always appreciate friendships from nice people.
I'm just a friendly person trying to get along with other traders which seems impossible on this site because everyone has egos larger than the continent of Africa and has egregiously horrid reading comprehension skills. I actually contacted the owners at one point. They never returned my email. Coincidentally, the house rules were amended soon after.
You could trade fundamentally all you want for the next 30 years.
All I'm saying is 'BE NICE.' which has absolutely NOTHING to do with how good of a trader you are.
I'm NOT in the mood for p*ssing contest. Go find someone at your level to do just that.