http://www.fxtradermagazine.com/archive.php?p=oct14 Page 72 – 88 Brian Twomey, FX Trader Mag, 200 year history Australia Exchange Rate and Monetary Policy
Where’s the trend NZD
NZD pairs is a typical example why and how uneven trends are a continuous function of actual prices.
For the past year, January 2014 to January 2015, NZD/USD and NZD/JPY led the way in percent gains from 15% in terms of NZD/USD’s minimum and maximum ranges at 0.8800 to 7600 lows and negative 5.29% in actual percent changes.
NZD/ JPY on the opposite side of the spectrum experienced 13.58% from its minimum to maximum at 93.40 to 82.70 and a + 7.52% change. NZD/GBP, NZD/CHF and NZD/AUD each shared about an 8% minimum to maximum percent range but NZD/CHF performed a 5% percent change Vs 3% for NZD/AUD and NZD/GBP. The next best performers was classic risk off NZD/CAD as it experiencd 11.1% in terms of its minimum to maximum ranges yet a 3% overall percent change while NZD/EUR witnessed a 10% range Vs 9.1% in percent change.
The first interesting relationship moving forward is NZD/AUD vs AUD/NZD as AUD/NZD’s 8% range saw a minus 3% change vs +3% in NZD/AUD. The only negative percent change in the NZD relationship was NZD/USD and it allowed its counterpart pairs to move higher. As mentioned many times and respectfully speaking, AUD and NZD pairs will continue to perform to earn best profits because neither pairs were involved in the 2008 crisis rather NZD and AUD movements and related pairs are victims of the crisis. AUD/NZD dropped 18% since crisis days from 1.25 highs to offer an example. For many years, its been trying hard to climb back to pre crisis levels. One day it might achieve that status again.
In order to see AUD/NZD move higher short term, 1.0630 must break and that level coincides with NZD/USD 0.7773. But the vital level above for NZD/USD is 0.7891. What prevents AUD/NZD to move higher is AUD/USD problems as well as NZD/USD.
We live in a current trading environment of risk off where the DXY ( The Dixie) is on fire and its showing no signs of a change in trend. What’s interesting about the NZD/USD relationship to AUD/NZD is the opposite NZD/AUD. NZD/AUD must break 0.9367 or AUD/NZD 1.0675 to move higher. What is seen is a 45 pip differential between NZD/USD V AUD/NZD. This means caution advised from 1.0630 – 1.0675. The most important points are NZD/USD 0.7762 and NZD/AUD 0.9538 or AUD/NZD 1.0484.
NZD/USD’s current trend bounced from 0.7762 upon Australia’s trade balance release and that level must break to see any downsides. AUD/NZD shorts must watch closely 1.0484. AUD/NZD is currently oversold and provides buy dip opportunites long into the future.
If NZD/USD goes higher then NZD/CAD heads short. But NZD/CAD is lifting off from vital 0.9100 and is currently overbought. NZD/CAD 0.9100 is a vital point in regards to yet again NZD/USD 0.7762. To deviate, notice NZD/USD still failed to participate in the Non USD selloff. EUR/USD dropped 2000 pips, GBP/USD 2000, AUD/USD 1500 from 0.9400. NZD/USD dropped from 0.8800 highs, 1000 pips thereabouts. Even DXY rose 1200 pips from 80.27. That should mean NZD has plenty of downside to go but my models over 2 weeks show a much higher NZD/USD. How does it rise further is seen in NZD cross pairs.
Over the past year, as NZD/USD dropped from its 0.8800 highs, NZD cross pairs rose substantially such as NZD/JPY, NZD/EUR, NZD/CHF, NZD/CAD, NZD/GBP, NZD/CHF. The pairs that rose most were NZD/JPY and NZD/EUR followed by NZD/CHF. NZD/JPY rose due from USD/JPY, NZD/EUR from EUR/USD and NZD/CHF from USD/CHF. The rise of NZD cross pairs and now overbought leaves NZD/USD on the floor and ready for takeoff but it assumes we see a correction in not only USD but NZD crosses. What we could see quite easily is a slow grind down in NZD crosses rather than a revealing trend particularly when NZD/USD is approaching vital levels above beginning at 0.7891 and 0.7942. NZD/USD could as well easily rise to vital points then rebound at the same time the NZD crosses hit supports. So NZD/CAD as a king of risk off pairs remains elevated due from USD/CAD.
NZD/JPY V NZD/USD is a relationship that has topped. Most important points short term for both pairs are NZD/USD 0.7772 and NZD/JPY 92.58. Point at 92.58 broke so next vital point below to see more downside gains is 91.06.
Again notice the common theme throughout regarding NZD/USD. Points above at 0.7770’s and below 0.7762 are big breaks.
NZD/CHF and NZD/USD shares a fairly mild negative relationship. Nothing exciting exists in NZD/CHF unless breaks are seen below at 0.7762 and 0.7721. The point at 0.7761 coincides with NZD/USD 0.7762. If the 0.7721 breaks are seen in NZD/CHF then the downside falls away and NZD/CHF trends lower. Above points important is 0.7867.
NZD/USD Vs NZD/EUR will see again 0.7761 NZD/USD Vs 0.6413 NZD/EUR or 1.5593 EUR/NZD. Another point vital is 1.5487 EUR/NZD and 0.6457 NZD/EUR.
Brian Twomey, Inside the Currency Market, btwomey.com and twbrian.wordpress.com
Okay. This blog is ?? 7 years old, never used. We’ll get this blog cleaned up, post currency and other type trades, post tons of market commentary, maybe figure webinars to help any interested to get going. We’re not going to play games here on this site since we are serious traders and commentators. I add serious analysis on a host of topics pertinent to the markets.
My experience is 11 years at currency trading with a book to boot called Inside the Currency Market: Mechanics, Valuation and Strategies. Its not a how- to – get – rich -quick book. Its a book for serious traders and students of the markets especially currency markets. A mathematical strategy book is titled Using the Z Score that is also available on amazon. Actual trades were performed over a 4 day period to teach how to use the Z Score to trade and help all understand the many moving parts in a Z Score. In this regard, the Z Score may be used to trade by itself, in combination with other parts. But its all encompassing and written to teach any interested traders how it all works. The Z Score if understood and employed in trades is an accurate trend following and short term target trading system. It works magically.
Published articles will also post here. Last few articles were located in FX Trader Magazine. I wrote 16 pages about the 200 year history of Australia’s exchange rate and monetary policy history. Last month was about the new Fed Repurchase Agreement program and how as well as when the Fed will raise the Fed Funds rate. Next week, on the FX Trader site will appear the present and future US yield curve in terms of spreads and relationship to the EUR/USD and USD/JPY. Seems both pairs are riding the 5 year yield and will continue to do so in the future.
For readers, followers and interested traders, economists and commentators, welcome. Brian Twomey