RBNZ cuts, Kiwi rallies as expected

Quick Recap

The RBNZ cut rates this morning and the kiwi roared. For those reading my notes that won’t be a surprise because the technical set up was there (see chart of the day) and, as I have suggested this week, everything felt like it was baked in the cake and NZ prime minister said the Kiwi had fallen further than expected faster than expected. That might help explain why the RBNZ was a little more dovish than expected.

As I wrote at Business Insider this morning.  Here’s Imre Spiezer from Westpac New Zealand’s explanation:

The crucial guidance paragraph read: “A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.” This is slightly more dovish language than June’s : “We expect further easing may be appropriate. This will depend on the emerging data.”, but not as strong as the market was hoping for.

Elsewhere stocks were lower but nowhere near as much as fears in Asia of how far they would fall. That’s besides the FTSE in the UK which is getting hammered on all fronts, not least of which are the miners as the commodity rout re-accelerates.

Indeed, if you’ll indulge me again, here is whati wrote atBsuiness Insider this morning. The price of crude came under attack last night.

 The fall of more than 3% has taken the Nymex front contract to a close of $49.19. Technical traders will be looking at the chart of crude and thinking, oops — that’s going back to $44.

investing.com-Nymex-crude

Elsewhere in commodities the World Bank expects iron ore prices to halve, while gold remains under pressure, although it is holding above the really important $1,085 technical level for the moment. Copper is down again at $2.43 a pound.

It’s getting ugly for commodities again. But that’s good news because that will help constrain the bond market sell off when the fed starts hiking because of what commodities say about inflation.

Here’s the overnight scoreboard(8.03am AEST):

• Dow Jones down 0.38% to 17,851
• Nasdaq down 0.7% to 5,171
• S&P 500 down 0.24% to 2,114
• London (FTSE 100) down 1.5% to 6667
• Frankfurt (DAX) down 0.72% to 11,520
• Tokyo (Nikkei) down 1% to 20,593
• Shanghai (composite) up 0.22% to 4,026
• Hong Kong (Hang Seng) down 0.99% to 25,282
• ASX Futures overnight (SPI September) -2 to 5,549
• AUDUSD: 0.7378
• EURUSD: 1.0924
• USDJPY: 123.93
• GBPUSD: 1.5612
• USDCAD: 1.3029
• Crude: $49.19
• Gold: $1,092
• Dalian Iron Ore (September): 376

On the day

Nothing in Australia today but we have Japanese trade data which is important in the context of the shape of the economic recovery. Retail sales in the UK tonight. Jobless claims in the US.
CHART OF THE DAY: NZDUSD

Looko at the three wise monkey’s of the last three candle sticks. It’s a great example of why I use my fast moving average as the target/resistance levels.

We reduced 50% of the trade before the RBNZ because – well it was a fundamental risk – and the balance when the Kiwi touched 0.6650 this morning. That’s my fast moving average.

So now we wait for a pullback perhaps to get long again.

My Aussie position is again looking tenuous. But I am still long.