Weekly trades: NZD/USD, NZD/JPY, NZD/CHF and USD/CAD
|The RBNZ informed to the possibility to negative interest rates. OCR dropped massively from 0.20 to 0.05 on the announcement and now at 0.06. With a headline interest rate at 0.25, the RBNZ has miles upon miles to go before negative interest rates are considered.
Not in 1 written paper from the RBNZ has negative interest rate been considered over the past 8 and 10 years. On the announcement to go negative, the RBNZ effectively had an interest rate drop but done through the overnight rate rather to headline.
The effective rate drop is credited and categorized as Forward Guidance and an overall Monetary tool used by all central banks.
The RBNZ actually states not an interest to negative interest rates but this quote "Therefore, once deposit rates are close to zero, lowering the OCR further may lose effectiveness as cuts would not significantly lower bank funding costs."
Further quote: NZDUSD The New Zealand dollar exchange rate is heavily influenced by offshore developments, particularly relative interest rates.
RBNZ sets the interest rate standard for the entire world after the Fed reports their own interest rates every afternoon. The RBNZ can't go negative as the RBNZ prices its interest rates from the FED then all nations price own interest rates from the RBNZ. Its a daily 24 hour rotation and works on every trading day.
Since the OCR drop, NZD/USD failes to correlate to its current interest rates and is operating at -83%. This is day 2 since the drop and NZD/USD as well as all NZD pairs must correlate to its interest rates. This is mandatory as an exchange rate cannot trade correctly in markets without a positive correlation to its interest rates. This means means NZD must adjust.
As stated many times, an interest rate change by a central bank takes 5 days to normalize. We're on day 2 and 3 days to go.
Weekly Trades
NZD/CHF is a problem pair to the NZD universe due to negative correlations to NZD/USD. But we're going with it this week. From the CHF universe, GBP/CHF has been the big winner over the past few weeks.
USD/CAD
Long 1.3123 and 1.3101 to target 1.3351.
Long above 1.3407 to target 1.3549.
Short 1.3549 to target 1.3476.
Short 1.3351 to target 1.3276
NZD/JPY
Long 68.47 and 68.38 to target 69.03.
Long above 69.22 to target 69.94.
Short 69.94 to target 69.40.
Short 69.03 to target 68.03
NZD/CHF
Long 0.5949 and 0.5935 to target 0.6015.
Long above 0.6028 to target 0.6081.
Short 0.6081 to target 0.6054.
Short 0.6015 to target 0.5975.
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