The Reserve Bank of New Zealand held its policy meeting early on Thursday, getting plenty of attention from market participants. There were no surprises; the central bank left its benchmark at record low of 2.5%. Markets, though, turned bullish on the New Zealand Dollar largely on expectations of rate hikes in 2014. As things stand today, the RBNZ could be the first major central bank, if they take action. Certainly, that is the consensus. Alternatively, with heightened expectation, farther stalling could be damaging to the NZD. It reminds me of the hype surrounding the CAD in the past couple of years, with the BoC pushing the anticipated increase in rates into ever more distance future. Eventually, markets lost faith and the CAD is back above the parity with USD. Whether the situation repeats itself here remains to be seen – for now markets like the Kiwi. The Swiss National Bank is next later on today.
In the previous post I covered the GBP-JPY, or more to the point, a divergence with the MACD indicator under development on the intermediate term chart. Still needed a bearish reversal candlestick pattern, in order to mark the possible reversal spot. The price touched 170.00 and promptly formed a bearish engulfing line. Once that showed up, I shorted this pair at 169.63, with 200 pips objective. Late on Wednesday, the GBP-JPY reached that target. I still want to short it, but right now, we need to see more price development, before deciding on the next trade.
Another currency pair I discussed recently was the AUD-NZD. It was oscillating softly around the key 1.10 level, so I was looking for a solid sign of reversal. None materialized and the RBNZ policy meeting caused this pair to make a new low, currently testing 1.09. The downtrend remains strong, but I still think it is overextended. No action now, but I will track it for signs of a rebound on the daily chart.
Mike K.