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Over the past couple weeks, New Zealand's kiwi has not been performing to the expectations investors expected. Analysts expected another 25 bp rate hike on Tuesday, but they were surprised by a 50 bp hike that took the interest rate up to 1.50%. So, why isn't NZD taking off right now? Here are some factors for and against buying kiwi.

Reasons For Buying Kiwi

Like the above statements, the Regional Bank of New Zealand decided to push past expectations of the original 25 basis point hike this month. This caused a drastic rise in kiwi's demand followed by a stark sell off in the moments after. A quicker rush to tighten monetary policy could be a good sign for bullish kiwi investors as the currency is outpacing other major countries.

New Zealand is also looking at a potential shift into recovery mode regarding the GDP growth rate. The second half of 2021 actually reported a decline of -0.20% after a significant rise of nearly 18% in the first half of that year. In 2022 so far, their GDP saw a positive rise in the growth rate.

buying kiwi
https://tradingeconomics.com/new-zealand/gdp-growth-annual

If NZ can continue this kind of performance on top of the higher interest rates, it would be hard to find a reason not to consider going long on the kiwi.

Reasons Against Buying Kiwi

Considering the factors above, there is a chance that investors may be worried that the more aggressive monetary stance will start to place hindrances on the economy. Investors want to see economic growth, an increase in spending, etc. However, with much higher interest rates than expected in a shorter amount of time, this could lead to a slow in growth as people stop spending as much and begin saving more.

The Kiwi is also not gaining much institutional interest overall. COT data shows us that big money reduced their long positions while increasing their stakes in contract shorts. Overall open interest was not impressive either, so it seems like institutions are not here to cause any major shifts in direction and we may have to rely on short term retail transactions. Having said that, it looks like retail is mixed.

Kiwi Setups

NZD/CHF

Retail is majority long on this pair as it has been on an uptrend since February. Price has bounced off support on the 1D timeframe, and now it faces resistance around a falling trend line. An important thing to look for here is a break and close above that trend line which would indicate further highs.

NZD/USD

This pair looks like it doesn't have much bullish potential to finishing out this week. Price action on today's candle suggests a further move to the downside as support lies around 0.67114. The overall trend since February is up, however. So, we could see a continuation of this move in the coming months. For the rest of this week, at least, I see the pair moving down to that level of support before finding a bottom.

The buck looks weaker today as Regional Bank of Australia governor, Philip Lowe is set to speak later today. The discussion will likely cover interest rates and economic outlook going forward, and traders will try to decipher clues on future policy. Here are our forecasts and our top setups on the buck.

Retail Sentiment

our setups on the buck
https://a1trading.com/market-analysis/retail-sentiment/

Investors seem to be mostly bearish on the buck amid the risk-off behavior echoing throughout the global market due to conflicts in Russia-Ukraine. The retail trader is now easing off speculative plays and shifting towards the USD and 'safer' currencies.

COT Data

The weekly commitments of traders data revealed that big money is growing their positions on long contracts on both gold and the buck. The monetary shift also included a considerable decline in short contracts for both markets. If this trend continues, we could start to see a more valuable buck over time.

Our Top Setups

AUD/USD

out top setups

The pair ended up retreating back under the 200-day and hovering just above the rising trend line on the 1D. The rising trend line looks like AU's strongest support right now, so a long position there would be something worth considering if price comes back down to that level. And depending on market conditions (gold loses value, RBA keeps rates the same), that support level could serve as a potential short setup on a break underneath.

AUD/NZD (Bearish Bias)

our top setups

This pair is showing some key indicators for a directional shift. One is the double top at 1.07957, and the other indicator is the lower low on today's candle paired with the dip under the 50 DMA. A close underneath the previous low would help solidify bearish sentiment on this pair. However, the 1D chart still has strong support at 1.06126 which would be a difficult level to break under.

AUD/JPY

AJ actually looks relatively strong here after retracing from a long term resistance level from the 1D timeframe. Although price retraced from resistance, it seems like the pair will try to make another test at the triple top, in which case will make a break above resistance more likely. Price is currently on support so it will be interesting to see where price will end up after today's session. If gold continues to outperform, so will AUD, probably.

Major USD pairs opened lower before immediately pairing losses from the lows today. Europe placed harsh restrictions on trade with Russia, and it is clearly affecting the global market. We are taking a look at a couple pairs' strange activity after sanctions and potential trade setups that go with them.

European Sanctions and Bond Yields

Sanctions by European governments have caused the ruble (Russian currency) to plunge amidst these restrictions placed on them. As a result, US stocks have risen, UK stocks have fallen, German stocks are up, USD is mostly down, and risk-on has returned for the most part.

Bond yields in the US are off the highs today as well suggesting that risk appetite is back. There is still uncertainty everywhere which makes risky plays questionable. However, if you were to be in the stock market or short USD today, you would have positive equity.

Strange Activity After Sanctions

GBP/USD

strange activity after sanctions

This pair gapped lower before immediately shooting higher back above support on the 1D. Major currencies are starting to look stronger than the USD right now which is concerning given the current circumstances.

NZD/USD

strange activity after sanctions

The kiwi jumped today after falling to support on the 1D. A weaker dollar today brought back a lot of risk-on sentiment in the forex market. The pair might come up to test the resistance level around 0.68637.

EUR/USD

strange activity after sanctions

The euro is doing the same thing on the same timeframe as it made a lower low gapping downward before buyers stepped back in. This is causing some bullishness for the time being, but this behavior is also concerning.

These jumps in price could be a trap for the retail investor as there is still weak momentum overall after risk-on behavior returned. I would wait to see what happens this week before making any big bets against the USD or going long on the stock market.

The Regional Bank of New Zealand is set to raise interest rates on the kiwi today. Here are some reasons why the RBNZ is now doing this 25bp rate hike plus pairs you would want to trade.

Combatting Inflation

New Zealand's 1-3% target inflation rate target is still way out of reach as CPI jumped another 6 points q/q. Below is a chart of the New Zealand kiwi's CPI from January 2019 to January 2022.

https://tradingeconomics.com/new-zealand/consumer-price-index-cpi

Although this seems bad for the currency, the rest of the world is in the same boat. NZD and GBP are the only countries that have taken a measurable stance towards combatting inflation so far. So, that 1-3% inflation target range will likely be reached before other countries can.

3 Pairs To Trade

AUDNZD (Short Bias)

RBNZ is now doing this

AUDNZD is looking like one of the pairs to be shorting right now as everyone anticipates the bank rate tonight to change from .75% to 1% in New Zealand. Support lies at the 50 DMA and lower at the 1.05900s. These two levels could serve as take-profit points. This reversion in momentum looks like the start of a down trend on the 1D timeframe.

NZD/JPY (Long Bias)

RBNZ is now doing this

NZDJPY just broke above a long term falling trend line starting in October from last year. A close above this level would suggest further upside and probably a test on the 200 DMA.

NZD/USD (Long Bias)

RBNZ is now doing this

NZD/USD continues to make higher highs and lows on the 1D timeframe. The pair is now up to the 50 DMA for a test. Further resistance sits above around .68600.

AUD pairs are drifting higher today in anticipation of Governor Lowe speaking about economic outlook and bank policy going forward. Aussie pairs are running as high as 1.20% at the time of writing this (AUDJPY).

AUD Forecast This Week

The buck looks like it will remain in bullish favor up until Thursday's RBA statement. Investors are expecting a clearer picture on the bank's monetary policy after Thursday as well as some hopeful statements regarding rising annual GDP growth rate.

AUD
https://tradingeconomics.com/australia/gdp-growth-annual

Australia saw the largest growth in GDP in Q2 of 2021 and slowed down in the third quarter, but GDP beat expectations in both quarters. We won't see Q4's numbers until March 2. And the low forecast leads me to believe that we could see another beat in expectations although the annual GDP growth rate has slowed considerably.

Another factor to consider is that a recovering economy could then lead to higher interest rates, according to an FXStreet article. If we take into account the possibility of higher rates in the latter half of this year, then we have to consider the possibility of investors pricing in a higher value in the buck. Lowe will probably cover that topic in depth during the meeting this Thursday.

Pairs that will probably do the best with this news would be AUD/JPY, EUR/AUD, and AUD/NZD.

AUD Pair Setups

AUD
AJ forms a double bottom support level and bounces up towards the 50 and 200 DMAs. A falling trend line on the 1D chart looks like the next major level of resistance. Additional support lies below around 78.788.
AUD
EUR/AUD could find resistance at the falling trend line on this timeframe and revert back to the moving averages or the lows of 2022. 1.57205 seems like another level of support for price to come down to should the pair fall under the 200 DMA.
AUD
AUDNZD is coming up towards June highs of 2021 after a huge momentum shift on the pair. A golden cross opportunity also marks bullish favor as sentiment around the buck is getting more bullish. Support lies below around 1.06497.

Why will US markets be flat or worse?

On December 15th the Federal Reserve Board of Governors made a press release detailing their plans to reduce their open market operation purchases in 2022. The central bank also predicts several rate hikes in 2021, and continuing on into 2023. When you combine this with the current overvalued state of the market, there's good reason to believe that we will see a minor correction, or a mostly flat market.

1. Fed Tapers Asset Purchases.

Fed Open Market Operation purchases of bank bonds and other assets of buoyed up the stock market. SPY and Fed assets look like virtually the same line. Running a correlation on SPY and Fed purchases from 1/2/2021 yields an astounding correlation between the two of 0.8537, or 85.37%. We hardly EVER see this much influence by the fed

2. Interest Rates

Rates have an inverse relationship with the market. When rates go up, stocks go down. What we want to know is how much rates will increase and how many hikes there will be. The Fed has indicated that there will be three hikes in 2022.

3. Overvalued Stocks?

Three Alternative Markets to Consider:

  1. King Dollar: The dollar has had an excellent run, as most FOREX traders know. But for all the reasons I mentioned above, you can expect it to do better in the long run. Less FED asset purchases and rate hikes will increase the USD's value relative to other currencies and traders should expect further gains in the new year
  2. Gold and Gold Miners: Downward pressure on US Equities and the FED backing off of support may scare investors out of the traditional equities. Two options for the prospective traders is your standard XAU pairs and gold miners. If you are unable to trade stocks on US markets, I recommend looking for gold miners on exchanges that are available to you in your own country

3. Emerging Markets and Heavy Industry related currencies in South East Asia and Pacific Economies
AUD, NZD will benefit form the gains in emerging markets in South East Asia. This year alone, Vietnam a 34% increase in their largest stock index. Because these are the largest regional speculative currencies in the area, FOREX traders looking to benefit from the gains in emerging economies would do well to consider AUD and NZD pairs.

For questions and comments, you can reach the author at smstreb97@protonmail.com or through the A1Trading discord at @smstreb97

Hey everyone! Welcome to this week's forex forecast for the week ending December 3rd, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at EURUSD, GBPUSD, GBPNZD & EURAUD.

EUR/USD

Price has fallen below the key horizontal level 1.14 which was seen as clear resistance many times in the past, and it looks like price may be going to retest this same level to either confirm as clear resistance or potentially make its way above this level again. Look out for price action confirmations as to how price reacts to this level before potentially going short.

GBP/USD

Price has made the next touch of the channel's bottom in this descending channel, and we could potentially see the trend continue and price head towards the channel's top. Look out for how price reacts to the key horizontal 1.342 level, as a break above suggests this whereas if price fails to break above, it's like we could see further downside movement to continue.

GBP/NZD

I've been pointing out that price did hit the bullish OB a couple of weeks ago, and it looks like price is now approaching the first TP just above 1.96 as it's potentially going to go inside this bullish breaker block. If price enters this zone and we see rejections, it's likely price will continue consolidating whereas a clear break outside of this zone higher suggests further bullish moves to continue.

EUR/AUD

Price broke out of this ascending triangle pattern pretty early and has already gone to the short-term key horizontal level 1.59 where it was seen as clear support previously. If price begins to reject this level, it's likely we will see price head back inside the pattern, but a break above suggests further bullish moves to follow, potentially towards 1.62 the next resistance.

11/23/2021

The pair is up 0.11% on the day after touching a significant resistance level as investors doubt that lawmakers will give any insight on the potential rate hikes in the December. On the other hand, New Zealand will be hiking rates and investors have been pricing in what could be up to a 50 bp raise in 2022.

Our outlook

I think it's more likely that we see an increase of demand on the kiwi when looking at the pair from a fundamental and technical standpoint for both the long and short term. Going into next year, the kiwi seems much stronger especially since the pound has been underperforming compared to other currencies. The pound hit a December 2020 low and is continuing to depreciate.

Trade Setups

Price came up to hit the top of a falling trend line in a downward channel on the 1D chart which was also matched with resistance at the 50 DMA. Rejection on the latest 1D candle indicates a potential turn to the downside which could take the pair down to the 1.91500s range.

11/19/2021

AUDNZD could be setting up for yet another short opportunity after a weak rise from the lows. The pair is up 0.21% on the day at the time of writing this

Our outlook

The Aussie buck still has no real strength behind it since the central bank never mentioned a rate hike any time soon. On the other hand, the kiwi looks strong due to the expectations of a hike up to 50 basis points in 2022. The pair looks weak overall as well due to the overwhelming pressure to the downside.

Trade Setups

AUDNZD

AN on the 1D chart is coming up to a possible retest on a falling trend line. Depending on how today and next week goes, we may see price come up to that falling trend line which investors are likely watching for additional short setups. However, if momentum is exceptionally weak, price may fall to the lows of 1.02825 for support.

Hey everyone! Welcome to this week's forex forecast for the week ending November 19th, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at AUDUSD, EURUSD, GBPNZD & XAUUSD.

AUD/USD

Following on from my A/U deep dive here, price did infact continue the move downwards towards the channel's bottom following a strong USD from positive tapering and inflation news. Currently, we're seeing a little retracement on the move we've had over the week, but its likely price will continue the trend to create the next higher low at the channel's bottom around 0.725.

EUR/USD

Price is breaking all medium-term lows and is now approaching pre-pandemic levels such as the resistance at 1.14. Price is pretty much there already, but look out for how price reacts to this level, a break below followed by successive retests and rejections, opens up price to key horizontal levels lower such as support at 1.12.

GBP/NZD

Last week we saw price reject off the daily bullish order block at exactly 100% and made a 150+ pip move to the upside already. We are seeing some rejections to the upside, so it's a potential that this zone could be broken and made into a breaker block, a zone to go short from. Look out for price action confirmations to how price reacts in the week ahead to the zone it's in currently, a rejection off higher suggests we'll be revising the previous support level at 1.92.

XAU/USD

Gold has created the next higher high in this short-term ascending channel, and just below the liquidity void at 1880-1900. Watch out for price to make its next higher low at the channel's bottom, to look for buying opportunities at a discounted price. If we see price retrace towards the resistance it has recently broken at 1835, look out for rejections to this zone to go long. If price falls back below, it's likely that further bearish moves back lower will follow.

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