Inside the Currency Market: EUR/USD

I’m not sure where trades stand. EUR/CAD hit target at 1.4837 from 1.4751 and EUR/USD hit at 1.1204 from 1.1155 We were caught on the short reverse from target as both pairs decided to go higher to extensions. We’re not caught, I didn’t plan for extensions to be seen. Extensions are nasty areas but aren’t seen very often. Non Farm Payrolls has a habit to see extensions to offer an example. If short stay short, we’re okay and not to worry. NZD/USD saw 0.6403 and bolted straight down on the RBNZ cut. The statement is on site for interested. It dovetails well with original commentary. Tradeables is again the big issue for New Zealand.

EUR/USD. Bottom. 1.1177. Range break above 1.1324, Below 1.1143. Overbought sell point 1.1299. Strategy. Longs above 1.1234, Target 1.1299. Then reverse short to 1.1266. Points on the way up, 1.1239, 1.1253, 1.1268, 1.1283, 1.1299. Failure point 1.1268 then short reverse to 1.1251.

Shorts below 1.1233, Target 1.1205. Watch this point for reversal to 1.1233. Below 1.1205, points on the way down, 1.1230, 1.1222, 1.1215, 1.1208, 1.1191, 1.1177 Bottom.

Brian Twomey, Inside the Currency Market, btwomey.com

NEW Zealand Monetary Policy Statement SEPT 10th 2015

Official Cash Rate reduced to 2.75 percent
Date 10 September 2015
Statement by Reserve Bank Governor Graeme Wheeler:

The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 2.75 percent.

Global economic growth remains moderate, but the outlook has been revised down due mainly to weaker activity in the developing economies. Concerns about softer growth, particularly in China and East Asia, have led to elevated volatility in financial markets and renewed falls in commodity prices. The US economy continues to expand. Financial markets remain uncertain as to the timing and impact of an expected tightening in US monetary policy.

Domestically, the economy is adjusting to the sharp decline in export prices, and the consequent fall in the exchange rate. Activity has also slowed due to the plateauing of construction activity in Canterbury, and a weakening in business and consumer confidence. The economy is now growing at an annual rate of around 2 percent.

Several factors continue to support growth, including robust tourism, strong net immigration, the large pipeline of construction activity in Auckland and other regions, and, importantly, the lower interest rates and the depreciation of the New Zealand dollar.

While the lower exchange rate supports the export and import-competing sectors, further depreciation is appropriate, given the sharpness of the decline in New Zealand’s export commodity prices.

House prices in Auckland continue to increase rapidly and are becoming more unsustainable. Residential construction is increasing in Auckland, but it will take some time to correct the imbalances in the housing market.

Headline CPI inflation remains below the 1 to 3 percent target due to the previous strength in the New Zealand dollar and the halving of world oil prices since mid- 2014. Headline inflation is expected to return well within the target range by early 2016, as the earlier petrol price decline drops out of the annual inflation calculation, and as the exchange rate depreciation passes through into higher tradables prices. Considerable uncertainty exists around the timing and magnitude of the exchange rate pass-through.

A reduction in the OCR is warranted by the softening in the economy and the need to keep future average CPI inflation near the 2 percent target midpoint. At this stage, some further easing in the OCR seems likely. This will depend on the emerging flow of economic data.

Inside the Currency Market: NZD/USD

The driver of New Zealand’s economy is a section inside Inflation numbers called Tradables and Non Tradables. New Zealand looks deep inside the CPI index at the drivers of CPI which is separated into service Vs what’s produced in the economy. Service is considered Non Tradeables and production is called Tradeables since it has an intrinsic value. Its the production aspects that drives the Inflation rate as well as overall determinations to raise or lower OCR. Its a brilliant system also adopted by its brother Australia. Simplified, If production is up overall then the NZ economy is moving along and the RBNZ can look to raise. Production down then the economy is not moving correctly. The 3 OCR raises in 2014 saw production tradeables just humming along smoothly. It was almost an easy decision to raise. But then the world economy slowed and so did NZ production as measured by Tradeables. So the RBNZ rescinded the 3 rates rises and now stands at much lower production levels. Add in the higher exchange rate from past bouts of high production then Exports also saw a massive reduction. It was a trap situation for New Zealand but one they couldn’t control. Now the exchange rate is far lower so any higher production means New Zealand can export at a cheaper price. The main Milk export however is at quite low production levels and isn’t expected to see sustainable levels until 2016 based on Fonterra;s lastet figures. What should the smartest central bank in my opinion do under current circumstances. Money markets say nothing will occur in an OCR move. We;ll hear the same old story, they want exchange rate lower, commodity prices lower and world economies to get moving again to benefit New Zealand.

NZD/USD. Bottom. 0.6355. Range break above 0.6419, 0.6450, 0.6468, Below 0.6354, 0.6323, 0.6305. Overbought sell point 0.6415. Strategy. Longs above 0.6387, Target 0.6415. Then reverse short to 0.6400. Points on the way up, 0.6392, 0.6402, 0.6415.

Shorts below 0.6386, Target 0.6370. Points on the way down, 0.6384, 0.6373, 0.6370, 0.6354 Bottom. Bottom breaks then next 0.0.6338, 0.6323.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/CAD

EUR/CAD. Bottom. 1.4676. Range break above 1.4870, Below 1.4631. Overbought sell point 1.4837. Failure point 1.4816. Strategy. Longs above 1.4751, Target 1.4837. Then reverse short to 1.4794, At 1.4816, reverse short to 1.483. Points on the way up, 1.4758, 1.4776, 1.4795, 1.4816, 1.4837.

Shorts below 1.4750, Target 1.4713. Watch for reversal here to 1.4750 and higher. Points on the way down, 1.4746, 1.4735, 1.4726, 1.4717, 1.4713, 1.4676 Bottom. Point 1.4713 must cross higher for longs to target 1.4750.

More pairs coming.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/USD

EUR/USD. Bottom. 1.1098. Range break above 1.1245, Below 1.1043. Overbought sell point 1.1204. Failure point 1.1188. Strategy. Longs above 1.1155, Target 1.1204. Then reverse short to 1.1179, at 1.1188 reverse short to 1.1171. Points on the way up, 1.1160, 1.1174, 1.1188, 1.1204, 1.1220.

Shorts below 1.1154, Target 1.1126. Watch for reversal here to 1.1154. Upon 1.1126 break, points on the way down, 1.1151, 1.1143, 1.1136, 1.1129, 1.1113, 1.1098 Bottom. Point 1.1126 must cross to go long to target 1.1154 and higher.

Brian Twomey, Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/CAD

EUR/CAD. Bottom. 1.4683. Range break above 1.4842, Below 1.4675. Overbought sell point 1.4845. Failure point 1.4824, 1.4803. Ranges still wide. Target 1.4845 then reverse short to 1.4801, Target 1.4803, reverse to 1.4780. Points on the way up, 1.4765, 1.4784, 1.4803, 1.4824, 1.4845.

Shorts below 1.4756, Target 1.4719. Watch here for reversal to 1.4756 and higher. BOC today. Break 1.4719 then next 1.4719 must cross higher to go long and target 1.4756. Points on the way down,1.4753, 1.4743, 1.4733, 1.4724, 1.4703, 1.4683 Bottom.

Brian Twomey Inside the Currency Market, btwomey.com

Inside the Currency Market: EUR/USD

Last night trades. EUR/USD Shorts below 1.1194, never looked back, Dead stopped 1.1143, Bottom 1.1138 held, + 51 total. EUR/CAD Shorts below 1.4766, never looked back, Dead stop 1.4704, Bottom held 1.4691, + 62 pips, Total overnight, + 113 pips.

EUR/USD. Bottom.1.1083. Range break above 1.1203, Below 1.1027. Overbought sell point 1.1206. Strategy. Longs above 1.1139, target 1.1206. Then reverse short to 1.1172, Failure point 1.1190. If hit, short reverse to 1.1164 and eventual break 1.1139. Points on the way up, 1.1145, 1.1159, 1.1174, 1.1190, 1.1206.

Shorts below 1.1138, target 1.1110. Watch here for reversal to 1.1138. Points on the way down, 1.1136, 1.1128, 1.1121, 1.1114, 1.1098, Bottom 1.1083. Longs must cross 1.1110 to head long and target 1.1138.

EUR/CAD next if not to late, BOC today

Brian Twomey, Inside the Currency Market, btwomey.com