MSolutions

NZD/USD Correction Unravels as RSI Falls Back from Overbought Zone

Dec 19, 2019 12:30 PM +05:30

*NEW ZEALAND DOLLAR TALKING POINTS

NZD/USD struggles to retain the advance from the monthly low (0.6424), and recent developments in the Relative Strength Index (RSI) warn of further losses as the oscillator falls back from overbought territory and offers a textbook sell-signal.
(0.6576) even though New Zealand’s Gross Domestic Product (GDP) report shows an uptick in economic activity, with the growth rate climbing to 2.3% from 2.1% per annum in the second quarter of 2019.

The limited reaction in NZD/USD suggests the GDP data will do little to influence the monetary policy outlook as the Reserve Bank of New Zealand (RBNZ) retains a dovish forward guidance and pledges to “add further monetary stimulus if needed.”

NZD/USD CORRECTION UNRAVELS AS RSI FALLS BACK FROM OVERBOUGHT ZONE
NZD/USD fails to test the monthly high (0.6576) even though New Zealand’s Gross Domestic Product (GDP) report shows an uptick in economic activity, with the growth rate climbing to 2.3% from 2.1% per annum in the second quarter of 2019.

The limited reaction in NZD/USD suggests the GDP data will do little to influence the monetary policy outlook as the Reserve Bank of New Zealand (RBNZ) retains a dovish forward guidance and pledges to “add further monetary stimulus if needed.”

Image of RBNZ interest rate decisions
However, it seems as though the RBNZ is in no rush to further embark on its rate easing cycle as “domestic economic activity is expected to increase during 2020,” and the central bank may largely endorse a wait-and-see approach at the next meeting on February 12 as the government plans to boost infrastructure spending by an additional NZ $12B.

The rise in public expenditure may encourage the RBNZ to adopt a less-dovish tone as “members noted that fiscal stimulus could be greater than assumed,” but the weakening outlook for global growth may push Governor Adrian Orr and Co. to further insulate the New Zealand economy as “growth in global trade and manufacturing is weak and uncertainty remains high.”

In turn, the RBNZ may stick to the dovish forward guidance as the committee prepares a contingency plan “for an unlikely scenario where additional monetary instruments are required,” and the central bank may continue to push monetary policy into uncharted territory as officials warn that risks surrounding the economy outlook remain “tilted to the downside.”

With that said, NZD/USD may face a more bearish fate in 2020 as the Federal Reserve sees US interest rates on hold over the next 12 months, and the advance from the monthly low (0.6424) may continue to unravel over the coming days as the Relative Strength Index (RSI) falls back from overbought territory and offers a textbook sell-signal.

Keep in mind,
the broader outlook for NZD/USD remains tilted to the downside as the exchange rate trades to a fresh yearly-low (0.6204) in October.
However, failure to break/close below the Fibonacci overlap around 0.6180 (161.8% expansion) to 0.6210 (78.6% expansion) has spurred a near-term correction in the exchange rate, with the exchange rate climbing back above the former-support zone around 0.6490 (50% expansion) to 0.6520 (100% expansion).
Nevertheless, the near-term correction in NZD/USD appears to be unravelling following the string of failed attempts to close above 0.6600 (38.2% expansion) to 0.6630 (78.6% expansion), with a break/close below 0.6550 (50% expansion) to 0.6570 (61.8% retracement) opening up the overlap around 0.6490 (50% expansion) to 0.6520 (100% expansion).
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मन से 'रावण' जो निकाले 'राम' उके मन में हैं !! The devision of time into Yugas as done by puranas :-
Satya Yuga
Treta Yuga
Dwapar Yuga
Kali Yuga
In Satya Yuga evil happens to be in a different world, different existence as known as Patala..
In Treta Yuga evil had a deeper infiltration he came closer from another world to another country (shrilanka) as Ravana..
In Dwapar Yuga evil had reached even deeper and darker levels of infiltration, from another country, the evil came into the same family(kauravas)...
Coming to Kali Yuga the infiltration of evil is complete and he came closer and closer from another world to another country, from another country to the same family and now it's within us.. evil is inside us... It's always our decision whom we want to win..
🙏

Australian Dollar Could Slide Again If RBA Speakers Stay Dovish
Mar 16, 2019 3:30 am +05:30


by MSolutions, Analyst

Fundamental Australian Dollar Forecast: Bearish

The coming week brings plentiful opportunities to gauge thinking at the Reserve Bank of Australia

Recent history suggests that this may not be good news for Aussie bulls

Look out for signs of trade settlement between the US and China though

Sentiment Page

The Australian Dollar endured a somewhat calmer time last week than it has for much of this young year.

Admittedly-feeble official Gross Domestic Product numbers were probably the domestic focus. However, they were for the final quarter of 2018 and investors have had plenty of more current data to chew over since then, not that much of it has been particularly rosy.

In any event the currency didn’t suffer the sort of knocks it had to endure last month when the Reserve Bank of Australia admitted that record low interest rates could yet fall further, and when it made big cuts to its own growth and inflation forecasts.

The coming week will bring the minutes of the last RBA monetary policy meeting and speeches from two of its members. Deputy Governor Guy Debelle and Assistant Governor Michael Bullock will both be talking.

Given the relatively ‘dovish’ monetary policy tone of RBA speakers these days, it seems unlikely that any of these events will be especially upbeat for the Australian Dollar. Any reminders that the RBA welcomes a weaker currency or leans towards a neutral view of the likely interest rate path, could see the Aussie slip further.

Some key economic data are also due, though, of which official employment numbers will be the most important. The labor market is one of Australia’s few unarguable economic success stories, with strong job creation holding up remarkably well even as other indicators wilt. If this trend endures, Aussie bulls could well jump at it, but signs of weakness even here would probably be quite damaging to their cause.

Purchasing Managers Indexes for March will also be released. The previous month’s PMI showed the service sector in the doldrums while manufacturing continued to expand. Traders can probably expect a short-lived AUD/USD move on these data but little more given their modest bearing on inflation and, therefore, RBA policy.

All up this looks like a week when the overall lack of interest-rate support could weigh on the currency again, so it’s a bearish call. Assuming no outlandish economic weakness, however, there seems little reason to suppose that falls will be heavy, even so. Look out for trade-settlement headlines between the US and China too. Hints of progress here will very likely see AUD/USD catch a bid.

US Dollar Mired in Range; US Yields Breakdown May Boost Gold Prices
Mar 16, 2019 2:30 am +05:30


by MSolutions Currency Strategist

Talking Points

- The ides of March bring about a quad witching Friday, which may help explain the recent lift in equity markets.

- Gold prices may see a rebound as US Treasury yields break lower in the near-term.

US Dollar Breakout Runs into First Resistance; Gold Uptrend Intact
Feb 12, 2019 8:04 pm +5.30
Talking Points

- The DXY Index breakout higher outside of its symmetrical triangle increases the odds of a return back to the December 2018 highs around 97.72.

- Despite the US Dollar breakout, Gold prices have been holding steady and remain within their uptrend from the November 28 and December 14 lows.

- Retail traders continue to add to their net-short US Dollar positions, continuing to add to EURUSD and GBPUSD longs in recent days.

The US Dollar (via the DXY Index) has finally been able to breakout of the symmetrical triangle that governed trading for the first six weeks of 2019, and is now taking a breather. Clearing the January 24 swing high, the DXY Index has been propelled higher by news that another US government shutdown will be avoided at the end of this week, as well as signs that US-China trade war could de-escalate shortly.

Another Spin around the Trade War Cycle

With the latest development in the US-China trade war negotiations, it’s just another run through the trade war cycle that’s been on rinse-and-repeat for the past year. As we’ve previously noted, the cycle goes:
(1) Trump administration is tough on China;
(2) financial markets sell off on trade war concerns;
(3) Trump administration hints at US-China trade deal;
(4) financial markets rally on trade deal hopes;
(5) No deal materializes.

Last week when we noted this we said that “we’re back to stage 2 with news that a meeting between US President Donald Trump and Chinese President Xi Jingping won’t take place before the March 2 deadline. Stage 3 could be just around the corner.” Indeed, with news coming out overnight that US President Donald Trump and Chinese President Xi Jingping will meet in the coming weeks (but not before March 2), there is growing hope that the détente window will be extended, thereby avoiding an escalation of new tariffs (or, in other words, stage 3, “Trump administration hints at US-China trade deal.”)

If financial markets are rallying on the back of the news, we’ve moved into stage 4; naturally, the next evolution in the US-China trade war negotiations would be for a letdown, where little real progress is made and concerns rise again that tariffs will be implemented come March 2.

US Government Shutdown Avoided?

Congressional Democrats and Republicans announced late last night that they’ve reached an agreement on how to move forward with both border protection and appropriated funding. The easy part is out of the way. The more difficult task is now convincing US President Trump to sign the budget into law. Early signs indicate that he intends on doing so, although the exact details of the budgetary agreement have yet to be revealed. The shutdown that lasted 35-days between December 23 and January 25 cost the US economy roughly -0.2% of GDP, according to the Congressional Budget Office; there seems to be a strong desire to avoid another self-inflicted wound on the economy by both parties.

Looking Ahead to RBNZ Rate Decision

The Reserve Bank of New Zealand rate decision tonight (in New York; tomorrow in Christchurch) comes at an interesting moment, with the New Zealand Dollar under significant pressure in the first half of February. With Reserve Bank of Australia Governor Philip Lowe taking on a more dovish tone, and given how closely tied together the Australian and New Zealand economies have been historically, traders have been pricing in a more dovish RBNZ when policymakers meet this week. With jobs growth slowing and below the RBNZ’s medium-term target of +2%, there’s room for 2019 rate hike expectations to loosen. At the start of February, rates markets were pricing in a 2% chance of a 25-bps rate cut this month and an 18% chance of a 25-bps rate cut by June; now, rates markets are pricing in a 9% chance for a February cut and a 42% chance of a cut by June.

EUR/USD Eyeing German Industrial Production, Gloomy Presentiments
Feb 7, 2019 01:00 pm +05.30

by MSolutions
EURO TALKING POINTS – EUR/USD, GERMAN INDUSTRIAL PRODUCTION, GERMAN-ITALIAN BONDS
Euro may suffer as Germany prepares release of Industrial Production
Dismal Factory Orders spook markets as EU engine sputters and slows
Italian-German 10-year bond yield spread widens as storm clouds brew

The Euro may move on Germany’s month-on-month Industrial Production data after Factory Orders numbers came in at -1.6 percent, substantially undershooting the 0.3 percent forecast. For over a year now, industrial production data has been on a downtrend since last year but has recently accelerated as the European economy slows down. The current forecast for tomorrow’s report is 0.8 percent growth with the previous at -1.9 percent.

Chart of Germany Industrial Production (YoY) NSA WDA
This comes as the three largest Eurozone economies are slowing down with Italy now in a technical recession, opening the door for another potential Eurozone crisis. With Germany slowing down as the region struggles with sluggish growth and political fragmentation, risk is beginning to grip the market. The spread between Italian and German bond yields has widened after a brief respite.

DXY Index Stalls as Markets Await Brexit Vote; Gold Breakout Continues
Jan 29, 2019 8:00 pm +05:30


by MSolutions Techinical Analyst
Talking Points

- The EUR/USD reversal during the ECB press conference is producing a bullish hammer on the daily chart, in turn helping DXY Index form a bearish shooting star.

- US Secretary of Commerce Wilbur Ross said that China and the US are “miles and miles” apart on trade negotiations and doesn’t expect a deal to come together next week.

- Retail traders have been quick to trim both Euro and US Dollar positioning during the reversals post-ECB today.

The US Dollar (via the DXY Index) has returned back to an area of former support that is once again proving pivotal this week. Amid concerns that the US federal government is hurtling towards another shutdown in less than three-weeks time, traders have been apprehensive about returning to the long greenback trade – even as global growth concerns continue to proliferate.

KEY BREXIT VOTE IN PARLIAMENT TONIGHT
We’ve arrived at another key Brexit deadline with UK Prime Minister Theresa May heading to parliament this evening to try and whip more votes for her EU-UK deal. This round of voting is on a slew of amendments that are designed to help make PM May’s deal more palatable for far-right wing Brexiteers over the question of the Irish border backstop and the 1998 Good Friday Agreement. Similarly, several amendments being proposed are aimed at helping prevent a no deal, ‘hard Brexit’ (e.g. grant permission to PM May to secure an extension to Article 50 if she can’t reach a deal by the end of February).

Given UK PM May’s pitiful track record of failing to properly whip votes – the ‘Plan A’ Brexit deal was rejected by a 230-vote margin, the biggest loss for a prime minister since 1924 – there are few reasons to believe that any sort of meaningful majority will emerge today on any vote. That’s not to say that failure today will provoke significant price action in the British Pound; in fact, unless there is a strong show of unity across Tory and Labour party lines to rework the deal altogether, it’s doubtful that the market reaction will be memorable.

GLOBAL GROWTH CONCERNS PROLIFERATE, FUELING GOLD PRICES
The last few days of any given month, as well as the first few days of the following month, typically bring about the release of several important economic reports; the transition week between January and February 2019 is no different. Besides the key Brexit vote in parliament tonight, this week traders are also awaiting the Federal Reserve’s January policy meeting, the Q4’18 Eurozone GDP report, the US-China trade negotiations (now with the added backdrop of the US Department of Justice bringing charges against Huawei CFO Meng Wanzhou), and the January US Nonfarm Payrolls report.

Against this backdrop of heightened event risk, investors have been curtailing their appetite for taking on long positions in high beta assets or high yield currencies. While this has left the US Dollar on uneven footing – after all, it is a focal point given that the government shutdown’s collateral damage on the economy and the knock-on effect to Federal Reserve policy – one asset has clearly benefited in recent days: Gold.

Gold Price Rise Stalls as Market Risk Appetite Unravels
Jan 29, 2019 19.00

by MSolutions Techinical Analyst
GOLD & CRUDE OIL TALKING POINTS:
Gold prices stall at chart resistance as US Dollar gains in risk-off trade
Crude oil prices down alongside stocks as sentiment cools market-wide
S&P 500 futures suggest risk aversion still the path of least resistance
Gold prices struggled for direction as renewed risk aversion offered conflicting cues, with a supportive decline in yields offset by haven-seeking flows’ support for the US Dollar (as expected). Sentiment-sensitive crude oil prices offered a more straight-forward response, falling in lockstep with stocks.

GOLD RALLY STALLS, CRUDE OIL MAY FALL FURTHER IN RISK-OFF TRADE
Looking ahead, a meaningful downswing in bellwether S&P 500 futures in Asia Pacific trading hours hints the risk-off mood has scope to continue. That suggests yesterday’s moves may find follow-through, with oil under pressure while gold treads water.

API inventory flow statistics headline the data docket. The outcome will be measured against expectations predicting a 2.7-million-barrel build to be reported in official EIA figures due Wednesday. A larger rise may amplify sentiment-driven selling pressure on oil prices, while a smaller one helps mitigate it.

GOLD TECHNICAL ANALYSIS
Gold prices stalled at resistance 1302.97-07.32 area after Friday’s swift rally. A breach above this barrier confirmed on a daily closing basis exposes the chart inflection point at 1323.60 next. Alternatively, a reversal lower that takes out rising trend support at 1281.76 opens the door for test of the 1260.80-63.76 region.

CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices drop to issue to the lowest close in two weeks, hinting at follow-through on the bearish Evening Star candlestick pattern identified earlier. From here, a daily close below support in the 49.41-50.15 area sets the stage for a retest of the 42.05-55 zone. Alternatively, push above resistance in the 54.51-55.24 region aims for the chart inflection point at 59.05.

Crude Oil Price Rebound May Struggle on US, China Trade War Fears
Jan 8, 2019 12.17 +05:30

CRUDE OIL & GOLD TALKING POINTS:
Crude oil gains with stocks on China RRR cut, upbeat US jobs data
Gold prices fall as yields rise in risk-on trade, but Powell helps a bit
Tense US, China talks may cool hopes for trade war de-escalation
Crude oil prices rose amid a broad-based recovery in risk appetite on Friday, echoing a spirited rise in global share prices. China announced that it will cut banks’ reserve requirement ratio (RRR) by 1 percent, cooling global slowdown fears. That was reinforced by impressively strong US jobs data as well as dovish comments from Fed Chair Jerome Powell.

Not surprisingly, gold prices fared poorly against the risk-on backdrop as ebbing haven demand weighed on Treasury bonds, sending yields higher and undermining non-interest-bearing assets epitomized by the yellow metal. Mr Powell’s comments helped erase some intraday losses however. The US Dollar traded sharply lower in their wake, boosting the appeal of anti-fiat alternatives.