NZDUSD longs from technical confluence
The RBNZ has been on a dovish footing recently since it released it’s ‘lower for longer’ monetary policy statement in August. The CPI data out last night was a test of the RBNZ’s dovish sentiment. The data for Q3 came in at 0.9% q/q vs 0.7% q/q. A good beat. However, as Eamonn pointed out, that increase in inflation was largely due to increasing fuel prices. See here as well. However, the beat has put a bid under NZD and that should help further boost the NZD at the moment, especially with the recovery of commodity currencies even in a risk off environment promoted by the fall in equities as of late.
From the USD side of the trade, there is a growing concern about the US’s current account deficit which is one of the reasons we have not seen a traditional USD safe haven play with all the equity falls we have seen over the last few days. Both Adam and Justin have been reporting on that and here is an excellent summary article from Justin which details that market concern with the US debt. See here. Furthermore, last night, Eamonn had a piece from Bloomberg he drew to our attention on the increase on US debt which now stands at a whopping $21.5 trillion. This is a good reminder of the US debt load and combine that with the increase in borrowing costs now set to rise into the future for the US economy, and falling equity space you can see the lack of USD appeal as a safe haven. Notice too the increased bid in Gold as investors look again to it as a safe haven. (hint: Gold longs makes sense too – look at the MA’s on the hourly chart for entries)
So, one chart I am looking at today is the NZDUSD chart. Looking at the 1 hour chart there is one excellent place of confluence on the chart that stands out. That is the point where the 50EMA, 61.8% Fib and horizontal support level all meet circled on the chart. An entry with a 10-12 point stop at that level makes sense for a play back towards the recent highs.