Nzd | Forex Blog

September 30, 2011

Kiwi (NZD) At 6-Month Lows!

Filed under: Forex News — Tags: a-reason-for, china, chinese, dual-downgrade, economy-relies, kiwi, markets, new zealand, nzd, pivot-support, relies, should-it-get, sitting-on-its, start-the-week, with-the-usual — admin @ 7:54 am

Thanks to a dual downgrade of their credit rating in New Zealand, the Kiwi has fallen to 6-month lows vs. USD. Part of the reason is also because of the risk aversion in the markets due to the Euro debt crisis, which is seemingly a reason for just about everything being lower.

However, the Kiwi is taking an extra hit because China is seeing its economy slowdown, as evidenced by declining PMI figures. Much of the NZ economy relies on exports to China so if Chinese demand declines, so will NZ exports. We saw on Monday worse than expected trade balance figures for NZ, which prove this point.

Nevertheless, the Kiwi does experience a positive interest carry and is currently sitting on its S1 daily pivot support just above 76 vs. USD. With the usual pattern of “risk on” to start the week and “risk off” to end the week, I can see the Kiwi holding the S2 pivot support just ahead of 75 so I’m looking to buy NZD/USD at 75.5 (should it get there) on a test of that support, with my stop just below 75.

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September 19, 2011

Forex Market Outlook 9/19/11

Filed under: Forex News — Tags: a-little-more, a-move-lower, carry trade, china, commodities, finance, killed-the-only, nzd, practice, practice account, usd, will — admin @ 7:04 am

The more things change, the more they stay the same in the Euro zone. This weekend produced further non-action on the part of EU Finance ministers and ECB officials, and the markets are voicing their displeasure by selling off this morning.

This morning, there is further question over whether or not Greece will receive its next tranche of bailout funding and a conference call that was supposed to take place today has been postponed for unknown reasons. This situation has been horribly mismanaged by European banking and finance officials and it remains to be seen if Greece can avoid default.

But with every passing day, the public anger increases and the will to resolve becomes weaker so if this can’t be resolved shortly it may not ever be. This comes ahead of the vote to ratify the new EFSF agreement that was made back in July, though this may change the dynamic of that agreement if Greece defaults. Now there is talk of a possibility of Greece defaulting AND remaining in the Euro zone, though I think that is highly unlikely.

Today is a day devoid of economic data, not that it matters much anyway when the overwhelming theme of the markets is the Euro debt crisis. So it will be difficult to turn the markets around unless we get some sort of comments from the Fed. Later this morning, President Obama will be speaking about the US debt problem, though that speech is more likely to set the stage for the 2012 election that offer any credible solutions to our problems.

On Wednesday, the FOMC meeting is expected to produce some further “help”, if you can call it that, to the markets in the form of “Operation Twist” whereby the Fed buys longer term Treasuries as opposed to the shorter term in an attempt to dive interest rates even lower.

Part of the problem is that what is going on here in the US is not because interest rates are too high, but rather because the economic climate is so bad that the uncertainty is causing business to shy away from the free money. The only place it really goes is to Wall St., who then use it to finance speculating activities that are likely to induce inflation, if they have any impact at all.

And inflation is something that Bernanke would love to see at this point, as it would mean a pick-up in demand. But demand won’t pick up unless people get back to work and unemployment comes down, though that seems unlikely with the current tax, regulation, and healthcare regime.

By demonizing the job creators, the government has effectively killed the only hope they have of seeing an economic turn-around in the US. This morning at the President’s speech we will see how serious they are about fixing the economy. Or will it be more about political preservation?

The news this week is likely to be secondary to Euro debt crisis, but we will get the minutes from both the RBA and BOE rate policy meetings. The BOE minutes are a little more significant as they do no issue a statement when they issue their policy decision. Recent events have left them more dovish than hawkish, though it may not matter much if the problems in the Euro zone get worse.

So the markets are in risk aversion mode this morning, with Dollar and Yen strength and stocks and commodities lower. With Euro trading at 1.3650 vs. USD we could see another move lower to 1.35 in short order. This will have the ancillary effects of pulling both the Aussie and the Loonie closer to parity with USD, though those areas of psychological support may present buying opportunities.

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September 13, 2011

Forex Market Outlook 9/13/11

Filed under: Forex News — Tags: after-the-next, china, currencies, currency trading, fear, fxedu, live, nzd, pair-eclipsed, rate-decision — admin @ 7:51 am

Well I’m just back from the FXCM currency trading expo in Las Vegas and man, did we have a lot to talk about there! The markets essentially collapsed last Friday and heightened fears have been ruling trading action ever since.

Yesterday the markets here in the US opened much lower after tanking in the Asian and European sessions, as European banks are now being attacked as the market believes they are misreporting their exposure to European sovereign debt. Why is this an issue? Because the market believes via the bond market that there is a 98% chance that Greece is going to default!

The problems in the Euro zone are starting to accelerate, likely more quickly than leaders’ ability to solve the problems. Considering they have had almost 2 years and have done little, this makes sense. Italy is attempting to take matters into their own hands, and a vote in Parliament over an austerity package is expected today. The market also bounced yesterday when it was revealed that they were meeting with the Chinese to find a buyer for their debt.

It is a sad day now that the US is losing its sphere of influence and world economies are turning to China and not the US for help. Perhaps that is because they have seen the disaster that Washington DC has become and would rather side with a quasi-communist country for economic help.

Case in point: the details of the President’s “jobs” program were revealed and it is just more of the same. Higher taxes, more government spending. That’s really it. He is trying to set up the debate for 2012 and the only job he is interested in creating is his own in Washington DC after the next election. It’s time to fire this guy, so that the rest of America can get back to work!

On the data front, UK inflation came in slightly higher than expected, though no one is expecting the BOE to tighten any time soon. In fact, their next move may be to ease further, though likely not through interest rates.

In the US, small business confidence is near all-time lows.

So the markets in the US are opening flat to slightly lower, and it is doubtful that any major risk-taking is going to occur until we something from the EU that can be deemed positive.

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September 8, 2011

Forex Market Outlook 9/8/11

Filed under: Forex News — Tags: australia, china, dollar, government, hint-at-what, nzd, switzerland, trade, trades, trend — admin @ 6:28 am

This morning, rate announcements from both BOE and the ECB produced no change in policy, as was largely expected. However, market reaction to each has been somewhat different. The difference between the two decisions is that the BOE does not issue a policy statement whereas the ECB does. The minutes from the BOE meeting will be released in about two weeks time, which will give a better idea as to what they are thinking regarding future policy, and some in the market are already calling for additional stimulus to offset the declining economy.

The ECB on the other hand is dealing with an entirely different situation with the debt crisis taking center stage. Having already raised interest rates twice this year, it is doubtful that they will reduce the rate any time soon. So the markets are betting that we will see further quantitative easing from the ECB in the form of bond buying from the periphery countries in an attempt to keep yields from rising too quickly.

Trade balance figures in both Germany and France came in lower than expected, and EUR/USD looks poised to test support at 1.40.

The Aussie is also lower but has rebounded from earlier lows after the unemployment rate unexpected jumped from 5.1% to 5.3%. The Australian economy was expected to have added 10K jobs but actually saw a decrease of 9700. One of the things helping to keep the Aussie somewhat stable is that the market sees less of a chance of a rate reduction after Tuesday’s rate decision.

One place where unemployment is not an issue is in Switzerland, where they reported 2.8% unemployment, as expected. It is no surprise that the Swiss franc is desirable with those economic metrics in mind, and is one of the reasons why the SNB set the “line in the sand” at 1.20 vs. Euro.

Also taking the “wait and see” approach to interest rate policy is the Bank of Canada, who yesterday also reported no change to policy. It seems that most Central bankers around the globe see the writing on the wall for a global slowdown so they are not concerned about inflationary pressure at this point. This will also leave them with the ability to reduce in the future should their domestic economies need a shot in the arm.

Later today, the US initial jobless claims are expected to produce another 410K new unemployed and this afternoon Fed Chairman Bernanke is giving a speech that some expect may lay the groundwork for further Fed action to ease monetary policy.

Dubbed “Operation Twist”, the action may be replacing the short-term debt the Fed has been buying with longer-term debt in an attempt to lower long-term yields. Normally, investors receive more interest for locking up their money for longer durations, but it is becoming apparent that Bernanke doesn’t want anyone saving in this countries and would prefer them spending to artificially get the economy moving.

What he is failing to see is that money will find its way to other investments and that investors will “hold their noise” and continue to buy US debt despite the lack of interest. For example, gold has been moving higher throughout the morning.

Later this evening, President Obama will be giving his speech on job creation and it will be interesting to see if he has logical, practical solutions that have the ability to be passed through Congress or if this is going to more political theater that has plagued our government and created a crisis of confidence.

So the markets have started the morning with a slight bias toward risk aversion, though that could change throughout the day and ahead of tonight’s speech.

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September 2, 2011

Forex Market Outlook 9/2/11

Filed under: Forex News — Tags: a-storm-brewing, commodities, currencies, currency market, currency trading, interest-rates-, markets, mike conlon, nzd, time, trader, trend — admin @ 7:08 am

Wow, we have just received one of the worst Non-Farm Payrolls reports on record, which showed that ZERO jobs have been created last month. That’s right, ZERO. Nada. Nilch. The expectation was for a gain of 65K jobs, but not a single one was created.

The good news is that the unemployment rate remained steady at 9.1%, though this is likely because of people dropping out of the labor force. The White House just came out with their own economic projections saying that the unemployment rate would stay above 9% for the rest of the year. No shock there.

Next week we get to hear the President’s ideas for job creation and frankly I couldn’t be less interested. This administration has been a total disaster on the economic front and the US is moving closer to double-dip recession with every passing day of ineffectual political leadership.

Obviously markets have tanked with the exception of gold, as the expectation is that Bernanke and the Fed will attempt to come to the rescue again with QE3. However, the markets aren’t ready just yet to come in to buy on that hope, and we will likely see continued volatility.

Meanwhile, the Dollar tanked right out of the gate against just about everything but the Loonie, though it is gaining strength vs. the currencies deemed “risky” like the Aussie, Kiwi and Euro. The Swiss franc, particularly has been gaining strength.

Oil prices are pulling back despite the threat of a supply disruption from a storm brewing in the Gulf of Mexico, and gold has shot up higher to around $1880.

Not much else matters this morning, and it will be interesting to see if the believe in QE3 can reverse some of this sentiment. My hunch is that we will not see much buying activity here, as we are heading into the long, holiday weekend.

Monday’s holiday is ironically Labor Day. Though it may have to be re-named Non-Labor Day!

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August 31, 2011

Forex Market Outlook 8/31/11

Filed under: Forex News — Tags: australia, currencies, decision, expected, invest, japan, nzd, out-describing — admin @ 7:14 am

I’m sure those that are faint of heart are happy to see the month of August come to an end today, as it has been quite the wild ride. Nevertheless the volatility has created numerous trading opportunities but has the left the longer-term investor scratching his head. While global economic data has been coming in weaker, monetary policy has generally been supportive of the capital markets.

The same though cannot be said of the effects trickling over to Main St., as unemployment remains extremely high. Today marks the start of the US employment data which kicks off with the ADP employment change today, initial jobless claims tomorrow, and the all-important Non-Farm Payrolls report on Friday.

This morning’s ADP employment change figures showed a gain of 91K jobs, lower than the expected 100K but good enough to keep the markets higher to start the morning. Last month’s ADP report surprised to the upside and so did the NFP, so the market may be thinking the same may occur for the NFP report which is expected to show the economy added 75K jobs. While some have tried to make the connection between the ADP and NFP jobs reports, no statistical data suggests that they are correlated. The bar has been lowered for NFP though, so we may see a better than expected number despite the summer slowdown.

In Canada, GDP figures came in worse than expected, with the quarterly annualized figure showing a decline of .4% vs. an expected no change. While the Loonie took an initial hit, it appears as though risk appetite may overrule adverse sentiment.

Earlier in Europe, German retail sales figures came in lower than expected showing a YoY decline of 1.6% vs. an expected decline of .8%. German unemployment fell by 8K, which was slightly lower than the expected fall of 10K, with the unemployment rate steady at 7%, which believe it or not, is low for Germany.

But perhaps the bigger news is that Chancellor Merkel may be building support for Germany to vote for the EFSF deal later this month. This would go along way toward stabilizing the debt crisis in the EU, particularly in Greece, but by no means is a complete solution.

In the UK, consumer confidence figures came in lower than expected, posting a reading of 31 vs. an expected 33. While the Pound sold off initially, it has since rebounded some as the market appears to be in risk-taking mode.

Overnight in Japan, industrial production figures came in lower than expected, showing that Japan is still not fully back online after the natural disasters that occurred there. Nevertheless, Asian stocks were higher. In New Zealand, the Kiwi shook off a lower than expected business confidence reading and is trading higher on risk themes.

Part of what is driving global markets is the release of the FOMC meeting minutes yesterday which showed that policy-makers are still committed to further monetary easing. This has the market believing that further measures could be coming, though it is uncertain what exactly those measures may be. While the Fed still has some tools left in its bag of tricks, the question is not “if”, but “how” and “when”. The answers could be revealed at this month’s FOMC meeting.

So the US session appears to be in risk-taking mode this morning, with stocks set to open sharply higher. Gold is giving back some earlier gains and it looks like oil is moving higher as well.

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August 12, 2011

Market Outlook 8/12/11

Filed under: Forex News — Tags: commodities, currency-pairs, dollar, fundamental, interest-rates-, loonie, nzd, rsi, sentiment, the-marketplace — admin @ 6:59 am

The markets appear to be somewhat tame this morning considering the massive volatility we have been seeing over the past week. Mid-triple digit moves on the Dow Jones Industrial Average have marked one of the craziest times in the market that I can remember—and this includes the go-go days of the internet boom/bust!

We know about the major risks in the marketplace, starting with the US downgrade, then moving back to the European sovereign debt crisis, followed by the rumors of problems with the European banks, and capped off by the slowing global economic picture.

Despite these problems, the markets are set to move higher after yesterday’s rally in the US. European stocks are also higher after a number of countries in the Euro zone enacted a ban on short-selling, trying to prevent an attack on the banks that may have exposure to sovereign debt. In addition, GDP in France contracted more than expected and Industrial Production figures in the Euro zone declined as well, posting a gain of 2.9% vs. an expected 4.2%.

Here in the US, Advanced retail sales figures came in as expected, showing gains of .5% in a sign that the US consumer might not be dead just yet. Michigan consumer confidence figures will be out later this morning.

So the markets appear to be in risk-taking mode this morning, with stocks and oil higher and gold trading lower. Demand for safe-haven currencies has abated, so the Swissie and the Yen are lower as well. Rumors of “mini-interventions” by both Central banks have the markets believing that those entities are active in the markets and are not tipping their hands as to what they are doing.

After the wild ride we’ve experienced this week, a bit of slowdown is welcome. But don’t be lulled into thinking that risk has lessened in the marketplace. In fact, I would say it has increased a bit as the global slowdown is accelerating and the drastic measures taken in Europe to ban short-selling may mean that problem with bank capitalization may be more tenuous than previously believed.

If you are taking positions long into the weekend, be sure to use proper risk management.

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August 5, 2011

Market Outlook 8/5/11

Filed under: Forex News — Tags: australia, check-out-today, dow, eur, fear, nzd, pound, time — admin @ 7:47 am

Well it looks like we dodged a bullet this morning with the US Non-Farm Payrolls report that showed jobs growth of 118K vs. an expectation of 85K. The unemployment rate ticked lower to 9.1% even though all of the recent data was pointing to a lower number.

Those of you who read my commentary know that when things appear to be at the worst, that is usually when you get an upside surprise! Check out today’s Forex In Four video (at the 6-minute mark) where I explain how this works and why I went on record expected 125K jobs prior to the release.

So why are we dodging bullets, this far into the “recovery”? Well the markets have been down 8 out of the last 9 days, with the crescendo hopefully taking place yesterday with the Dow down some 500 points. This is a direct result of a slowing global economy, and the debt crisis still taking place in the Euro zone.

Yesterday after the ECB rate policy decision, they decide to do an about-face and go from a previously hawkish to dovish stance as both Spain and Italy are under attack by the bond market as yields continue to move higher which will eventually move to unsustainable levels and will require a bailout if something isn’t done to prevent this. This sent the markets into a mini death-spiral.

And this is also emblematic of the ECB’s lack of attention to this problem over the last year. As yields were being driven higher on the “3 little pigs”, the ECB did nothing until the problems got out of hand. Now that Spain and Italy are in the cross-hairs, it may be too late to act and will assuredly cost more to deal with now as opposed to being preemptive. It is very telling that laissez-faire comes from the French.

So the markets are clearly relieved today though it will be interesting to see if this is enough to stem the tide of the Euro zone debt crisis, or if the market is looking for QE3 from the Fed. Regardless, it may be tough for investors to take risk assets over the weekend, despite the massive selling we’ve seen of late.

The volatility in this markets sets up perfectly for short-term trading, and that’s what I will continue to do!

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August 1, 2011

Forex Outlook 8/1/11

Filed under: Forex News — Tags: carry trade, commodities, currency-pairs, forex trading, from-the-rba, fundamental, fxedu, nzd, picture, practice, practice account, stock, unemployment, week — admin @ 6:53 am

I’m back from vacation this week and boy did I pick a good time to get away! Well not really, but it was nice anyway. The insanity that is taking place in Washington DC looks like it may be coming to an end, but let’s remember that while a deal has been reached, it has not been voted through just yet.

There still is some safe-haven rotation going today with Yen and Swiss franc strength, yet gold is pulling back from all-time nominal highs. A “relief rally” is underway in the equity markets with global stocks and oil higher, but after last week’s carnage this was to be expected.

Despite the general sigh of relief in the markets, this does not feel like classic risk appetite has returned to the markets, but rather US dollar weakness, perhaps on the notion that QE3 may be around the corner. Last week’s dismal GDP report and the potential for this week’s Non-Farm Payrolls report to get worse may bring the Fed back into the picture.

This week will also bring rate policy decisions from the RBA in Australia tomorrow, and the ECB, BOE, and BOJ on Thursday. While no change is expected, the BOE will be the only Central bank not issuing an accompanying statement. Inflation expectations have risen, but look to these banks to try their best to avoid looking hawkish. BOJ intervention hopefuls are waiting for action, but it may not be forthcoming.

Volatility still abounds in the markets, and this debt ceiling agreement is not a done-deal just yet.

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July 7, 2011

Rate Decisions, Employment Loom Over Markets!

Filed under: Forex News — Tags: cad, course, currency, economy, health, jpy, morning, nzd, show, time — admin @ 7:45 am

This morning, rate policy meetings in both the EU and UK have gone as expected, with the ECB raising interest rates 25 bp and the BOE leaving rates unchanged. This illustrates the dynamic between the economies and how each Central bank is responding to both domestic and global conditions.

While the ECB may be facing the greater challenge with Greece, Portugal, et al.; the commitment to fighting inflation and providing relief to its citizens in the face of potential problems is commendable. Meanwhile, the BOE has taken the US approach and has burdened its citizens with higher prices so that the government can bail itself out of the years of bad decisions it has made.

The other side of today’s data is employment which is a gauge of the health of economies. While initial jobless claims are expected to come in at the usual 420K, tomorrow’s NFP report will show actual job creation. Today’s ADP employment change figures may give a clue on what to expect tomorrow.

One place creating jobs right now is Australia, whose unemployment rate of 4.9% is pretty good considering the size of the economy.

So today has started with risk appetite higher, as nothing unexpected has occurred (yet) this morning.

In the forex market:

Aussie (AUD): The Aussie is higher after the economy added 24.5K jobs vs. an expectation of 15K and the unemployment rate remained steady at 4.9%. In addition, full-time employment went up and part-time employment went down, perhaps suggesting that employers are growing more confident.

Kiwi (NZD): The Kiwi is higher on risk appetite and I’m still trying to figure out when the postponed GDP report will be released.

Loonie (CAD): The Loonie is moving higher as oil prices and risk appetite have both increased this morning ahead of this morning’s home price index reading as well as a PMI report.

Euro (EUR): The ECB did as expected, raising interest rates .25% and German industrial production figures came in better than expected, posting a monthly gain of 1.2% vs. an expectation of .8%. If they can just figure out how to solve the debt crisis, the EU economy appears to be pretty strong. That, however, is a big “if”.

Pound (GBP): The Pound is mixed after the BOE left rate policy unchanged, and tomorrow’s GDP estimate may be the reason why they are unwilling to fight inflation. Mixed data points also came in with industrial production figures decreasing more than expected at -.8% vs. -.5%, but with manufacturing production figures beating expectations posting 2.8% vs. 2.1%. (Click chart to enlarge)

Swissie (CHF): The Swissie is mostly lower after CPI data came in slightly lower than expected showing price gains of .6% vs. the expected .7%. Thus safe haven demand is reduced today. (Click chart to enlarge)

Dollar (USD): The release of the ADP employment change has sent the markets much higher this morning as it came in much better than expected showing job gains of 157K vs. an expected 70K gain. Initial jobless claims came in slightly better than expected at 417K, but the market may be revising its predictions for tomorrow’s NFP.

Yen (JPY): The Yen is weaker across the board as risk appetite has increased thanks to the ADP jobs report. Tonight, Japanese trade balance figures should show a larger deficit as the supply chain disruptions have affected exports.

The ECB is proving that the show can go on with higher interest rates despite the looming debt problems they have in the region. While it is unfortunate that they and Euro zone leaders did not handle the Greek debt crisis as well as they could have given the time they had, if they can come up with a viable solution, the EU economy looks pretty good right here.

Contrast that with the US economy, where the Fed is absolutely terrified of raising rates and is content to let citizens suffer through inflation. While today’s ADP report is highly encouraging, we have a long way to go here in the US to return to financial health.

Extremely accommodative monetary policy has to end soon and the business climate must change in order to get things moving again. We have to return to normalized conditions so that businesses can plan for the immediate future and not be afraid of government policy decisions that may be driven by the whims of the populace and whatever feels good today.

Tomorrow’s NFP report will be a big one if a number like today’s ADP is produced. Expectations have been low so far and the public perception of government is near an all-time low. The debt ceiling debate is just one hurdle in a series that needs to be overcome, but the road to recovery is through employment gains and politicians should be doing everything they can to encourage and not hinder it.

But for now, continue to invest in those countries that are showing strength, by selling those that exhibit weakness!

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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Tags: account, AUD, Aussie, blog, cad, course, currenc, currency, currency trading, dollar, dow, economy, EUR, Euro, forex, forextrading, free, fxedu, gbp, jpy, market, Mike Conlon, nzd, practice, ssi, time, trade, USD, Yen

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