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NZDUSD: RBNZ MONPOL DECISION PREVIEW - BOE OR RBA STYLE?RBNZ Monetary Policy Decision : 1. At 22:00GMT the RBNZ are expected to cut their OCR rate to 2% from 2.25% (25bps), further they will release their monpol statement and rate statement then too - with RBNZ Gov Wheeler speaking 1hr after the release. 2. The are a number of outcomes which are likely to or not to affect the NZD$ market, I will list the combinations below from the very LHS/ Dovish to the more mild and RHS- Combination of outcomes - assuming the 25bps cut is certain as it is priced 100% into kiwi rates markets: 1. LHS NZD$ response fall to 0.690-0.681 - a 50bps rate cut, dovish statements and offering strong easing biased forward guidance e.g. hinting at further cuts likely, possible QE, other alternative measures being taken if kiwi persists strong - and Gov Wheeler Reiterates this dovish and highly committed sentiment in his speech.. - BOE and Gov Carney speech last week is a good illustration of a LHS response, very strong commitment to future easing - despite denying negative rates (housing market sentiment could be the equivalent here) 2. Average NZD$ response fall to 0.710 on the day - a 25bps rate cut, some weak references to future monpol - Wheeler fails to convince the market anything new will be coming 3. RHS NZD$ response = stable at market, then whipsaw higher to 0.73 on the day as investors flock to the highest G10 carry - a 25bps cut, no references to more easing and a theme of conplacency - Wheeler is neutral and perhaps makes mention to the housing environment limiting the RBNZ's hand with future easing. - RBA's rate cut and SOMP last week and Gov Stevens speech yesterday is a good example of a RHS rate cut and neutral statement/ Speech - offering no forward guidance on policy, no hits at future easing conventional or otherwise - where we have seen AUD$ move 200pips higher despite the cut My Opinion on the most likely outcome: 1. Assuming the RBNZ have seen the very bullish AUD reaction to this weeks WEAK rate cut by the RBA/ Stevens (as discussed above) and the RBNZ has also seen the bearish reaction of the market towards BOE/ Carney's reaction to their aggressively dovish statement, speech and policy measures (e.g. cut and 60bn in QE); - And assuming the RBNZ have seen Kiwi's strength (or USD weakness) and the high levels/ bullish sentiment kiwi is going in at into this monpol decision, which is particularly important now since the RBNZ's emergency economic assessment which stated that they didnt appreciate the strong kiwi$ and would like to bring it down. - These two factors in mind, plus the fact kiwi data has remained weak and RBNZ at even 2% after a 25bps cut is still the highest yield currency by a massive 50bps in G10 (AUD at 1.5%), so thinking of these 4 elements which are all very dominant calls for dovish/ 50bps cut policy It makes sense to think that the RBNZ will be skewed to delivering a very dovish/ LHS monpol package and a BOE M. Carney like speech by Gov Wheeler, especially since the House inflation issue has been discussed and macroprudential policies are set to be put in place in september to try and curb this issue where of past this has been a hawkish limitation on the RBNZ's will to be dovish and ease more. - However, guessing central banks this year has been tricky (BOJ in mind) so there is no certainty, and also there are some worrys over the RBNZs ability to cut 50bps at once - despite the need for it as a 25bps cut leaves a 50bps differential between AUD and NZD which will continue to cause deflationairy pressure and bullish NZD as investors flock to kiwi over the close partner Aussie - given this the RBNZ should be even more inclined to cutting the 50bps so that their ccy isnt used as the "carry ccy". There has been several calls by sell-side houses for a 50bps cut, but as above only time will tell.
Short
by QuantumLogicTrading
3
NZDUSD/ AUDUSD: MONETARY POLICY DECISION HIGHLIGHTSRelatively poor delivery from the RBNZ, by the looks of the whipsaw the market wanted/ expected 50bps based on the AUD differential and the RBA rate cut last week 50bps or some alt policy (e.g. QE) seemed like the smart move to make. From here Kiwi and Aussie longs look preferential as the macro environment shifts to a yield seeking stance from monpol trading - 0.782 for AUD and 0.76 for NZD seem the next bull levels. RBNZ unlike RBA offered some promsing forward guidance though e.g. "further policy easing willl be required" and "A decline in the exchange rate is needed" and "high NZD is causing negative inflation in tradables sector" and "Low global rates are placing upward pressure on the kiwi dollar" - all of which comments point to the RBNZ issuing more dovish easing but it does also ponder the question that given they knew this before making the decision why they didnt execute some of the "further policy easing" and "monpol will continue to be accommodative" which will be required in the future now, to have a greater effect vs just a 25bps cut which the market had already digested weeks ago. The RBNZ also interestingly referenced the low global rates environment causing NZD strength through carrry/ hot money flows - which once again begs the question if the RBNZ know that their rate is the leading rate in G10 by 50-150bps, why did they only cut 25bps as a 25bps cut still keeps NZD as the headline ccy for carry and will likely continue to attract hot money flows unless investors are scared by aggressive future policy - which is now in the hands of Gov Wheeler to project the aggressiveness (or not) of the RBNZ to combat the rate differential and consequently bring the NZD down where they feel it is acceptable. Imo given the markets reaction alot is riding on Gov Wheelers speech in 35mins - he needs to be VERY dovish in his forward guidance rhetoric and offer certainties that make kiwi seem less stable than AUD in the future and thus send the hot money flows into AUD and in order to tame kiwi below 0.73, otherwise we will likely see a replication of the AUD case where we moved 100pips+ on the day despite a cut and SOMP and Gov Stevens speech. From here we wait for the speech. If the speech fails to tame kiwi, i suggest buying kiwi as it is likely to outperform given the lack of easing vs expectations/ what is needed to move NZD lower. Further AUD longs are also advised in this carry seeking macro environment - a Dovish RBNZ makes AUD more attractive but even a neutral RBNZ should help AUD also as it puts less pressure on the RBA to ease since the rate differential between their biggest partner is large enough and still in their favour for kiwi buying for aussie. Nonetheless at these technical levels i like AUD to 0.78 and kiwi to 0.76 if we break 0.734 and Wheeler isnt specific/ aggressive with the forward guidance + the USD weakness is likely to last this week with 0 data coming out so longs make even more sense if only short term RBNZ Monetary Policy Decision Highlights: RBNZ: Risk of Further Declines in Inflation Expectations RBNZ Says Further Policy Easing Will Be Required RBNZ: House Price Inflation Adding To Financial Stability Concerns RBNZ: Monetary Policy Will Continue To Be Accommodative New Zealand Dollar Rises After RBNZ Cut To US$0.7315 RBNZ: A Decline In Exchange Rate is Needed RBNZ: House Price Inflation Remains Excessive RBNZ:Lower Dairy Prices Depressing Farm Sector Incomes RBNZ:Domestic Growth Supported By Inward Migration, Construction, Tourism RBNZ: Low Global Rates Placing Upward Pressure On NZ Dollar RBNZ: Trade Weighted Index Signficantly Higher Than Assumed in June MPS RBNZ: High NZ Dollar Causing Negative Inflation in Tradables Sector NZ Central Bank Sees 90-Day Bank Bill at 2.1% in 4Q 2016 vs Prior 2.2% NZ Central Bank Sees 90-Day Bank Bill at 1.8 % in 2Q 2017 vs Prior 2.1%
by QuantumLogicTrading
NZDUSD SHORT UPDATE: EYE RBNZ GOV G. WHEELER SPEECH CLOSELY!The Govenor of the RBNZ is speaking in 16 hours time - there could be significant up/ downside volatility in Kiwi - as we have seen after the past 3wks where the RBNZ have gone through the full hawk-dove cycle in their inferences/ rhetoric. We had RBNZ Spencer's comments on house inflation back on the 7th of July which wrote off an RBNZ OCR cut - sending kiwi$ to 12m highs, then we had the RBNZ announce an Emergency economic assessment which was a dovish move - then the assessment itself was extremely dovish and reassured markets that the RBNZ would cut the OCR citing Kiwi strength/ persisting low inflation as the drivers, bringing us round circle and push kiwi to 0.69lows . RBNZ G Wheeler likely comments 1. IMO he is likely to discuss the marcoprudential policies the RBNZ can use to tame the house price inflation in NZD, in an attempt to assure markets that it isnt over looking the houseflation issues in NZD post their economic assesment which ssaid they would cut the OCR (which would potentially make the HPI situation worse) - discussing or implementing new restrictive Macropru would be hawkish but likely over seen by the OCR cut. 2. IMO Wheeler will reiterate findings from the economic assesment e.g. high NZD price, low inflation and the need to cut the OCR - this will be heavily dovish and should send kiwi$ to the 0.6900 level if not towards 0.6800 if he really emphasised the inevitability of the OCR cut in August. Risks to the view: 1. Obvious risk to this view is 1) Wheeler back tracks on the economic assessment, follows Spencers tune from July 7th and undermines the need to cut the OCR - either in itself or as a function of the HPI situation. - Any inferences that the RBNZ/ Gov Wheeler IS NOT backing the cut/ economic assesment findings and kiwi will likely bounce to 0.72 immediately, and back to the 0.73 highs within the week. - there is still 2wks until their rate decision/ meeting on the 10th of August so there is still room for Wheeler to talk hawkish/ throw another spanner in the work before actually making the decision. Trading Strategy: 1. As above - any hawkish sentiment that moves us higher/ rallies kiwi I will sell into as i believe fundamentally the RBNZ has called its hand and anything between now and the 10th is noise - its best to wait for the information to full price e.g. to 0.72 but if momentum slowed near 0.71 I will sell there. - I dont have any interest buying any hawkishness or selling any dovishness at these levels - I will only sell 0.71+ pull backs as i think the rate cut is imminent and any hawkishness is just the RBNZ trying to keep the markets on its toes - Technically we are seeing some downside deviation + MA support - with kiwi$ trading on its 3m -2SD channel line and 3m Moving Average line, this looks supportive, with kiwi$ posting a green day once it hit hit these two techncials (as you can see highlighted in red) - this could continue to support a hawkish bounce, which is good for re-shorts. Eyes on the comments closely! *Any questions please let me know - I will be providing RBNZ Gov Wheeler Highlights ASAP*
Short
by QuantumLogicTrading
2
SHORT NZDUSD: GOLDMAN SACHS FORECASTS 0.68, 0.64, 0.62 GOLDMAN SACHS EXPECT 3 RBNZ RATE CUTS OF 25BP APIECE IN AUG, NOV AND MAR. In a scheduled "Economic Update" published on Thursday, the RBNZ signalled a significant strengthening in its easing bias, and dovish shift across its views on domestic inflation and domestic/global growth. At the heart of many of these changes is renewed concern about the elevated NZD. In our view, these changes make clear that the RBNZ is positioning for a deeper easing cycle, notwithstanding ongoing risks to financial stability from rising house prices. NZDUSD Targets: - 3 Month: 0.68 - 6 Month: 0.64 - 12 Month 0.62 This is largely inline with my previous posts/ reaffirms my short view of NZD$ - especially with the possibility of 50bps of cuts increasing for this year (GS citing two cuts); Plus I also see increased USD strength over the medium term as rate hike expectations/ implied probabilities ever grow - Fed Funds Futures Opt Implied probs now trade at 19.5% for Sept, 20.8% Nove and 40% for Dec, up from yesterday at 18.8, 20 an 39.8 - the firsk-on bias already started today will likely see these probabilities continue to strengthen until the end of the day. The Probability of 2 hikes this year is also becoming an ever stronger possibility with 2 hikes pricing at 7.5% in Dec - and with July Pricing a hike for the first time since Brexit at 2.4%
Short
by QuantumLogicTrading
2
SHORT NZDUSD: RBNZ DOVISH ECONOMIC ASSESSMENT HIGHLIGHTSThe RBNZ was dovish in their economic assesment and IMO used it to communicate their 100% commitment to a OCR cut. Key drivers of this view were quotes such as "futher policy easing will be required, and monetary policy will remain accomodative.", "NZD currency strength makes it difficult to hit target inflation" and "NZD exachange rate is too high stronger NZD implies inflation outlook will be weak" So clearly there is no illusion as to the RBNZ's August 10th decision. Perhaps the only question, given the extensiveness of the dovish rhetoic/ comments is how much will the RBNZ cut? could it be 50bps rather than than the usual 25bps given how aggressively dovish they have came out on the record. Trading Strategy: 1. From current levels there is little interest in adding fresh shorts - shorts still standing from 0.72/3 are firm and should be held. A 25bps cut IMO will take NZDUSD to 0.68TP and a 50bps cut, with the shock pricing it even lower, likely to 0.65/4. 2. Risks to this downside view continue to be RBNZ driven. As we have seen in the past 2wks Kiwi has traded at the mercy of the RBNZ - 2wks ago when the OCR rate cut initially began to price us to 0.70, the RBNZ came on record talking about kiwi house prices limiting the ability to cut the OCR which caused NZD$ to rally back to 12m highs, where then a week later, the RBNZ announced their emergency "economic assesment" which completely flipped the script back on the dovish side - now this week the assesment has been released and is dovish with the rate hike being price now. - But in the 3wks between now and the rate decision, im sure there is a level for more RBNZ comments to conflict this dovish sentiment. RBNZ Economic Assessment Highlights: -RBNZ: Further Policy Easing Likely -RBNZ: Will Continue to Watch Emerging Flow of Data -RBNZ: House Price Inflation Excessive -RBNZ: Bank Lending Curbs Aim To Limit Financial Sector Instability -RBNZ: Many Uncertainties Around Outlook -RBNZ: High New Zealand Dollar Adding To Headiwinds For Dairy, Manufacturing -RBNZ: High NZ Dollar Makes It Harder To Achieve Inflation Target
Short
by QuantumLogicTrading
2
SELL NZDUSD: EYES ON CPI PRINT 23:45GMT - >0.5%=0.73; <0.4%=0.67Short 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). - See here for more details on NZD CPI and likelihood of a RBNZ OCR cut: www.bloomberg.com - 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
Short
by QuantumLogicTrading
19
NZDUSD Daily Outlook + TCT+ Bat PatternNZDUSD has been in a downtrend on the Daily chart for a very long time. We may be in the middle of another retracement giving us a great opportunity short into strength. This will be a Huge trade and would require a 350 Pip Stoploss. But the Reward is over 1,200 Pips. This is an excellent opportunity for a Position Trader as it will take months to play out. I have made a "Kill Zone" using a variety of technical patterns. 1. We have a Bat Pattern completion @ .7565 2. ABCD Pattern (just barely makes into my kill zone) completion @ .7414 along with the 78.6% Fib Retrace 3. 1.618% Ext - Pulled from lows to B leg of Bat Pattern. It has a nice confluence with the Bat Pattern This will be a HIGH CTS (Combined Technical Score) trade IF market will push back up there. Best of Luck!
Short
by PateSkpate
My Kiwi Strategy for the week.Im mostly looking to go long on this trade to ride its final 5th Wave up. But as for my aggresive trading nature I am keen on selling the breakout of the recent hourly trend which Im looking to get a 2:1 Return . My TP for the Shorting trade will be 38.2% fib and thereon will be my Long setup for a 3:1 return with a TP at the recent highs or higher. If you are more cautious I suggest you wait for the consolidation to take place and find a sutiable buy zone according to your RM. Again my buy zone is just above 38.2% fib with SL below 50% fib. I wish myself and everyone the best of luck.
Long
by moemia
POTENTIAL LONG OPPORTUNITY IN KIWIThe kiwi is currently moving in an upwards trend channel. By combining the fibonacci timezones with the fibonacci retracement we can locate a good long opportunity in the zone between the outside retracement of the previous swing low to swing high and previous structural support and resistance . The first limit target is based on previous structural resistance and the .236 fibonacci retracement level. The final profit target is placed where the fibonacci extension meets the fibonacci timezone. The trendchanel also indicates that it most likely won't move much further up after this level. The stop is placed just below the .618 fibonacci retracement level which almost gives us a risk/reward-ratio of 2 to 1. / Uncle & Son
Long
by Uncle-Son