SELL NZDUSDNew Zealand dollar has given us a great setup. I expect price to drop to the 0.6710 zone. My stops are tight as always at 0.6808. Always use proper money management.
Shortkiwi
long eurnzdlong eurnzd for two target that shown in the chart. flag is firmed and price is supported by Fibonacci cluster.
NZDUSD short setup, high probability trade. Third bounce. Lets see how this one plays off, high probability trading setup third bounce its in play whit 78.6% fib retrenchment perfectly align
The Kiwi is Looking All Black and BlueSimilar fundamental reasons underlie my bearish bias on the Kiwi. The bidirectional monetary policy impacting rate differentials being the most meaningful.
Further, technically, one would expect some material levels within the next handle, as evidenced by my red support line which roughly marks out the neckline of a head and shoulders top. Finally, with the MACD turning bearish on such an important trend-line, one has a reasonable argument for action to take some risk.
NZDUSD: TECHNICAL ANALYSIS - 0.70 RES, MA, STDEV, IV=HV & RR NZD$ Technical analysis - Remain bearish below 0.70 - 0.69tp1 0.68tp2 on a rate cut (Aug 10th):
Key level close:
1. On the daily and weekly we closed at the strongest pivot point of recent times at 0.70 - this is very bearish as historically this is the strongest level (lower than post brexit).
MA:
1. We trade below the 4wk and 3m MA - this is a bearish indication + we are finding some support at the 3m moving average where price currently sits, though NZD$ looks to try and push lower with daily candles skewing their spikes to the downside. We have been above the 6m MA since June which sits at 0.69 and likely offers our next bearish support once we break the 3m MA.
IV/ HV:
1. Realised Vols have also unsurprisingly aggressively come off in recent days, likely a function of the RBNZ rhetoric fading. Plus Implied vols are seen steeper in the 1wk and flatter in the 2wk-1m - with 1wk, 2wk and 1m Implied vols trade at 13.12%, 12.66%, 13.09% vs HV 1wk 2wk 1m at 10.90%, 15.60%, 14.58% - this mixture between HV and IV shows there has been considerable volatility drivers in the past/ future which are causing the curves to converge and diverge in no particular direction e.g. brexit, RBNZ hawkish/ dovish comments, future rate expectations - which all distort the interaction between HV and IV.
Deviation Channels/ Support levels:
1. We Trade near to the bottom of the 6m deviation channel at 0.69 as NZD economic assessment asserts downside pressure on the pair, nonetheless but we could see support here as 0.69 is also a price action support level. Looking at the 12m SD channel, we are trading just below the average price at 0.703 - hence there is definitely more room for downside and we have just crossed the middle regression line implying we are entering some downside deviation now, with the 12m -2SD resistance level at 0.675 which is in line with the price support level at 0.68 which is where i think we will head after the RBNZ announces a 25bps cut..
Risk-Reversals
1. 25 delta Risk reversals trade marginally bearish for NZD$, with current at -0.2, 1wks at -0.3 and 2wks at -0.6 and 1m at -0.95 - this suggest the NZD$ has a slight downside bias which concurs with the RBNZ's dovish stance and committment to cutting rates that was made clear in the July economic assesment (see attached).
- 3m risk reversals trade with a similar downside bias to the 1m at -1 which shows the market expects extended NZD$ downside, likely a function of further rate cut expectations from the RBNZ.
*Check the attached posts for indepth fundamentals*
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*
DXY/ USD: FOMC MINUTES & FED TARULLO/ DUDLEY SPEECH HIGHLIGHTSJune FOMC Minutes Highlights:
- FOMC Minutes: Fed Officials Divided on Rate Path Amid Uncertain Economic Outlook
-FOMC Minutes: Members Said Prudent to Wait for More Labor Market Data, Brexit Vote Before Raising Rates
-FOMC Minutes: Prior to Brexit Vote, Staff Saw Uncertainty Holding Down Investment in U.K.
-FOMC Minutes: Members Judged It Appropriate to Continue to Leave Policy Options Open, Maintain Flexibility
-FOMC Minutes: Staff Saw 2H GDP 'a Little Slower' Than in Previous Forecast
-FOMC Minutes: Most Officials Said UK Referendum on EU Could Generate Financial Turbulence
-FOMC Minutes: Staff Saw Risks to Forecast from Developments Abroad 'Skewed to the Downside'
-FOMC Minutes: Officials in June Said Pace of Labor Market Gains Slowed, Economic Growth Picked Up
-FOMC Minutes: Most Participants Saw Risks to Economic Projections as 'Broadly Balanced'
-FOMC Minutes: Many Participants saw Risk to GDP, Inflation Forecasts 'Weighted to the Downside'
-FOMC Minutes: Officials Said Job Gains Diminished in Intermeeting Period Although Unemployment Rate Fell
-FOMC Minutes: Some Participants Saw Risks to Unemployment Rate Forecast 'Tilted to the Upside'
-FOMC Minutes: Soft Readings on Business Investment Behind Lowered Participant GDP Forecasts
-FOMC Minutes: Most Members Indicated Recent Slowdown in Payroll Gains Increased Uncertainty About Labor -Market
-FOMC Minutes Showed Officials Divided on Reasons For Weaker May Payrolls Growth
-FOMC Minutes: However Many Participants Said Underlying Pace of Job Gains Slowed From Recent Months
-FOMC Minutes: Many Participants Said Neutral Rate of Interest Likely to Be Lower Than Estimated Earlier
-FOMC Minutes: Most Officials Expected to See 'Continued Progress' Toward 2% Inflation Target
-FOMC Minutes: Some Participants Said Sluggish Business Investment Could Portend Slowdown
Fed Tarullo & Dudley Speech highlights:
NY Fed Dudley: Current Treasury Yield A Concern
Tarullo: Global Financial System 'Reasonably Well Prepared' For Brexit Shock
Tarullo: Have to Watch to See How Brexit Macroeconomic Developments Play Out
Tarullo: Brexit Response in U.S. Gone About As We Expected
Tarullo: There Won't Be A Moment Where We Say 'Brexit Is Done'
Tarullo: Right Level of Interest Rate Depends on Factors Affecting Economy
Tarullo: 'This Is Not An Economy That's Running Hot'
Tarullo: Fed Probably Not Providing As Much Accommodation As People Think
Tarullo: Were Economy to Pick Up Rapidly, Fed Has Tools to Respond Appropriately
Tarullo: Better For Fed to Wait For More Evidence of Rising Inflation
Tarullo: Want to Be More Convinced Underlying Inflation Closer to 2%
Tarullo: Low Rates Can Create Financial Instability, But That May Not Justify Raising Rates
Tarullo: No 'Immediate Concerns' About Financial Instability, Asset Bubbles
Tarullo: Still Has Concerns About Liquidity Broadly, Especially Outside Banks
Tarullo: Cutting Capital Buffer Could Make Loans More Available 'If There Is Demand'
Tarullo: Policy Easing by Other Central Banks Can Have Disinflationary Effect on U.S. Economy
Tarullo: Wants More Evidence of Inflation Before Raising Interest Rates
SELL NZDUSD: +2 STANDARD DEVIATION PIVOT POINT ON DAILY & H1Also as additional technicals to support the short NZD$ view:
1. On the daily, H1 and weekly NU currently Trades (and at 0.73) close/ at to its +2 standard deviation lines, these are highly resistive.
- Assuming NU trades mean reverting +2SD means there is a 95% chance of a price reversal/ 95% of all prices should be below the +2SD channel lines (e.g. NU highly likely lower from here).
-- And as you can see by the Yellow circle highlights NU has held this +/- 2SD discipline in the past so is highly likely to maintain these levels in the future.
2. Also NU trades significantly above its 60, 120, and 250 Moving Averages on 1h, 4h, 1D, 1wk - this also signals strong overbought prices, where selling has a higher probability of success.
*Be sure to check the attached post "SELL NZDUSD @0.73 - TP 700PIPS: BREXIT, RBNZ, FED & USDJPY HEDGE" for NZDUSD short fundamentals*
