Early today New Zealand joined a long list of countries unhappy with strength of their currencies. Governor of the RBNZ Graeme Wheeler, speaking in front of domestic business leader, called the Kiwi overvalued. In addition, he boldly stated he was ready to intervene in the markets in order to weaken the NZD. To be fair, he also said that was not an attractive proposition, but he leaves it on the table. That much for the G20 agreement on “competitive devaluation reached just few days ago. So far, it is largely ignored, in words at least.
Markets certainly took the speech seriously, with the NZD-USD falling 60 pips immediately, followed by another 65 pips over the course of the day. It is a large move for this pair, out of proportion to its recent volatility. While the intervention is frankly a remote proposition, traders are certainly sensitive to remarks of this sort. After all, so many other countries are trying to weaken their currencies, through any possible means, so why not New Zealand?
< From the potential trades discussed here this week, only one reached its conclusion. I was looking for a bullish breakout in the USD-CAD, based on its intermediate term chart. The entry was at 1.0106, seeking 1.0200 level. Today, the price touched as high as 1.0184, but immediately developed a shooting star candlestick pattern, normally a bearish sign. While it does not necessarily kill the uptrend, it increases the likelihood of consolidation/correction, so I decided to pocket some profits, 63 pips to be exact. Incidentally, another trade from the same post, long in the GBP-CHF, is clearly not happening and the order is cancelled.
One of the currency pairs I have been following for a long time is the EUR-JPY. Last week, the price dropped to 122.88, making this level the new pivotal support. Weakness on Wednesday suggests possible return to that area. If the EUR-JPY breaks this support, I want to sell it, with a target of 200 pips. However, the breakout must be clean. If the initial move on the 4H chart quickly turns north, I will get immediately and wait for a better entry.
Mike K.