Like I previously mentioned in my other published idea title BOLD GOLD, because of the hawkish fed and raising inflation The USD is stronger than most if not all G7 currencies. As a result commodities & commodity currencies across the board is selling off such as the NZD & AUD, they may be the weakest currencies crossed w the USD. Last week I sold this pair at 0.61875 and took profit at 0.59986 a -3.05% move (-189 pips).This week I reopened a sell position w some of the profits from the trade I closed out last week at 0.60697 and at the present moment market is down -1.24% (-75 pips). My current take profit is 0.58793 ( -190 pips) but the market can definitely pull lower if the USD strength persist as I suspect it will, at least until the next rate decision on the 22nd of this month. If or when NZDUSD breaks & close below the 4 month trend line found on the D1 I can definitely see this pair heading towards 0.57000 a -4.8% (-287 pips) move from market current price. Lastly, in less than 1 hour the USD PPI YOY & PPI ex Food & Energy numbers will be released , the consensus is 8.8% & 7.1% respectively, a surprise higher than a expected number could fuel another USD rally, a lower than expected number can cause a temporary retest. Let me know your thoughts in the comments.
Trade active:
Global themes/factors remain dominant ahead of next week’s Fed meeting
“Kiwi has made a more convincing break below 0.60. The more substantive move should quell any debate about whether the 0.60 level has been sustainably breached or not, and technically, it brings 0.5940 (the 76.4% Fibo of the 2020/21 rally) and 0.5915 (the May 2020 low after the April 2020 bounce) into focus.”
“FX sentiment remains USD/globally driven, and the NZD struggled to garner any support from GDP data yesterday. Surprising as that was, given the size of the miss, what that tells you is that the market will be sensitive to next week’s Fed ‘75 or 100 bps’ rate hike decision.
“Kiwi has made a more convincing break below 0.60. The more substantive move should quell any debate about whether the 0.60 level has been sustainably breached or not, and technically, it brings 0.5940 (the 76.4% Fibo of the 2020/21 rally) and 0.5915 (the May 2020 low after the April 2020 bounce) into focus.”
“FX sentiment remains USD/globally driven, and the NZD struggled to garner any support from GDP data yesterday. Surprising as that was, given the size of the miss, what that tells you is that the market will be sensitive to next week’s Fed ‘75 or 100 bps’ rate hike decision.
Comment:
Economist at UOB Group Lee Sue Ann reviews the latest GDP figures in New Zealand.
Key Takeaways
“GDP rose by 1.7% q/q in 2Q22, in contrast to the 0.2% q/q fall in 1Q22, and higher than expectations for a print of +1.0% q/q. Compared to the same period one year ago, GDP rose by 0.4% y/y, following a revised 1.0% y/y print in 1Q22 (1.2% y/y previously), and also more than expectations of 0.0% y/y.”
“Data is still very volatile and is likely to stay that way for the next couple of months, with offsetting effects due to the normalisation and recovery from lingering COVID-19 disruptions against softer domestic demand from higher interest rates. This will set the scene for slower growth towards the end of the year and into 2023. We have thus lowered our GDP forecast for growth in 2022 to 1.8% from 2.4% previously and to 1.8% for 2023, from 3.0% previously.”
“Still, this is unlikely to deter the Reserve Bank of New Zealand (RBNZ) from further increasing borrowing costs to tackle inflation. The next RBNZ meeting is on 5 Oct, where we are penciling in a 50bps hike in the OCR from 3.00% to 3.50%.”
Key Takeaways
“GDP rose by 1.7% q/q in 2Q22, in contrast to the 0.2% q/q fall in 1Q22, and higher than expectations for a print of +1.0% q/q. Compared to the same period one year ago, GDP rose by 0.4% y/y, following a revised 1.0% y/y print in 1Q22 (1.2% y/y previously), and also more than expectations of 0.0% y/y.”
“Data is still very volatile and is likely to stay that way for the next couple of months, with offsetting effects due to the normalisation and recovery from lingering COVID-19 disruptions against softer domestic demand from higher interest rates. This will set the scene for slower growth towards the end of the year and into 2023. We have thus lowered our GDP forecast for growth in 2022 to 1.8% from 2.4% previously and to 1.8% for 2023, from 3.0% previously.”
“Still, this is unlikely to deter the Reserve Bank of New Zealand (RBNZ) from further increasing borrowing costs to tackle inflation. The next RBNZ meeting is on 5 Oct, where we are penciling in a 50bps hike in the OCR from 3.00% to 3.50%.”
Trade closed: target reached:
FED DELIVERD! next stop 0.57000.
Did you like this analysis? let me know in the comment section.
Did you like this analysis? let me know in the comment section.
The annual Core PPI edged lower to 7.3% from 7.6% but surpassed the market expectation of 7.1%. On a monthly basis, the Core PPI was up 0.4% following July's increase of 0.3%.
Market reaction
These figures don't seem to be having an immediate impact on the dollar's performance against its rivals. As of writing, the US Dollar Index was down 0.15% on the day at 109.60