Tag Archives: Blake Morrow

AUD/NZD showdown set for tomorrow, “High Noon”

Well, it will be “High Noon” somewhere tomorrow, right?

The AUD/NZD is technically in breakout territory, but tomorrow is going to be a big day for the pair. Tomorrow afternoon we have the RBNZ rate decision, and a couple hours after we have the Australia employment numbers for May.

Keeping in mind, technically the pair is pointed to a move of 1.1300 (from the double bottom, retest of neckline) in the coming weeks, the combination of tomorrow’s news could set the pair off in that direction. (see chart below)

6-10-14AUDNZD

The RBNZ is expected to raise rates another .25% tomorrow 3.25%. This would be the 3rd hike in 3 meetings. The market has priced in a total of 8 hikes in the next 2 years to 4.5%. There is some skepticism that the market may have overpriced two more hikes in 2014. In the event the RBNZ leads the market to believe that they may not be as hawkish into year-end (especially with housing moderating recently) the NZD currency is at risk for a continued pullback.

Turning attention to the Australia jobs numbers a couple hours later, it must be noted that the last three employment numbers Australia has beat the expectations. I don’t see this time as any different as full time employment also seems to be swinging higher too. Labor force participation rate is ticking lower which may be a concern.

In the event that the RBNZ tones down future rate hike expectations and Australia comes in with a stronger employment picture, it could send the AUD/NZD higher and continue this massive short squeeze that had started earlier this year.

 

Blake Morrow @pipczar

Chief Currency Strategist, Wizetrade

Disclaimer: I have been long the AUD/NZD since below 1.0900 and maintain my position.

USD Index “Long Wicks”

One of the best technical indicators for me is when I am looking at a Japanese candlestick on a daily or weekly trend, and see a “long wick” as we near a close or an interval. The reason why this is so powerful is because that means that traders were caught  a little wrong footed early on, and may have got “caught on the wrong side” and are forced to trade the other direction to cover shorts or liquidate longs. Hence a reversal takes place.

In the case of the USD, the market has definitely been bearish. No signs of letting up…until yesterday’s ECB meeting. This meeting has changed the outlook near term of the EUR and the ECB future policy actions, hence the USD index (which is comprised of about 57% of the index) may be influenced as well. Some pundits will say “the ECB has yet to act” but the market seems to care less since it seems to be caught a little “wrong footed.”

Whether or not the USD can capitalize or not on this recent squeeze or not, will be dependent on central bank activity in the coming weeks. However, 2014 has been the year of the hibernating bull for the USD. Don’t look now, but I think the bull just growled at you!

USD Index Daily chart:

5-9-14DXYDaily

USD Index Weekly chart:

5-9-14DXYWeek

DJ FXCM USD index Weekly chart (for a little more balanced USD view):

5-9-14USDWeek

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I started buying USD selectively against European currencies post ECB meeting yesterday