Clear Bearish NZD Bias - Bear market to confirmed
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Market bias is clearly against NZD as commentary mount towards central banks that have yet to jawbone their currencies down with clear announcements of forward guidance.
Mario's comments were as clear as ever putting asset purchases back on the table and a quick scan of relative bearish moves EUR versus only currencies show that NZD is a close second. To put things in perspective, check out EURZAR.
Not claiming any conspiracies but rather suggesting that forex moves will start drafting towards currency and economic stimulus via monetary policy. The ECB and FED would forced to be primary actors due to extremely low likelihood of fiscal policy support thanks to epic bureaucracy (EU) and epic partisanship (US). This is known and expected therefore any remaining central bankers that remain 'coy' about their intentions would be the risk element.
Reasons why I have long bias to NZD is that:
- RBNZ as a single mandated central bank has a target of 1%~3% inflation and currently that is tracking at 1.5%.
- Still has 7 shots left (technically 9 as cuts diminish as interest rates near zero)
- positive current account
- Actual minimal trade war impact as a soft commodity exporter ( I keep emphasizing this)
- Construction is strong
- Political incentive for both Xi Ping and Trump to show thawing dialogue at G-20 (likely agree to the return of negotiations)
- Trumps attention to EU and criticism of Europe trade dynamics with US
Should not be expecting volatility back in this pair anytime soon as I expect this pair to continue it's trending tendency and recent up trend is not confirmed for a reversal until the 1.705~ area is breached and defended. Possible scenario to play out if trend analysis holds true with EU PMI to be the driver of downward moves.
If PMI shows positive then expect a violent upward spike
Mario's comments were as clear as ever putting asset purchases back on the table and a quick scan of relative bearish moves EUR versus only currencies show that NZD is a close second. To put things in perspective, check out EURZAR.
Not claiming any conspiracies but rather suggesting that forex moves will start drafting towards currency and economic stimulus via monetary policy. The ECB and FED would forced to be primary actors due to extremely low likelihood of fiscal policy support thanks to epic bureaucracy (EU) and epic partisanship (US). This is known and expected therefore any remaining central bankers that remain 'coy' about their intentions would be the risk element.
Reasons why I have long bias to NZD is that:
- RBNZ as a single mandated central bank has a target of 1%~3% inflation and currently that is tracking at 1.5%.
- Still has 7 shots left (technically 9 as cuts diminish as interest rates near zero)
- positive current account
- Actual minimal trade war impact as a soft commodity exporter ( I keep emphasizing this)
- Construction is strong
- Political incentive for both Xi Ping and Trump to show thawing dialogue at G-20 (likely agree to the return of negotiations)
- Trumps attention to EU and criticism of Europe trade dynamics with US
Should not be expecting volatility back in this pair anytime soon as I expect this pair to continue it's trending tendency and recent up trend is not confirmed for a reversal until the 1.705~ area is breached and defended. Possible scenario to play out if trend analysis holds true with EU PMI to be the driver of downward moves.
If PMI shows positive then expect a violent upward spike
Note
Bullish French PMI - is it enough to swing outlook of EU?
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