Sticking with the charts

STICKING WITH THE CHARTS - Final day of trade for the month of March and always interesting to see what type volatility we get on end of month flows. Although March proved to be a profitable month for my book (S&P shorts), the overall FX price action was more of a let down, with nothing really happening. A lot of market timers had been looking for a major pullback in US equities which never materialized, while most of the major currencies were locked in directionless trade. The most impressive movers for the month were the commodity currencies, with Aussie and Kiwi very well bid. Aussie made a very nice comeback rally after being beaten down for so many months, while Kiwi continued to retain a strong bid tone to trade just off cyclical highs in the face of a seemingly robust local economy and a very hawkish RBNZ. But I don't believe this relative outperformance in the commodity currencies will hold up much longer, and I am still looking for the New Zealand Dollar to roll over quite significantly in the months ahead. At the moment, there doesn't appear to be any solid fundamental argument to support this case, but I will defer to the longer-term technicals, that in my view are projecting a toppish formation and bearish reversal.

WHY SHOULD THIS ONE BE ANY DIFFERENT? - When the Australian Dollar was tracking over 1.0500 back in 2012, there was plenty of reason to be looking to sell the market on a technical basis, and yet, at the time, the fundamentals to support such a contention were nowhere to be found. But the currency did finally relent and within a moment, the local economy was slowing down dramatically, and market participants had forgotten just how bullish things were. The same thing with the Canadian Dollar months later. So while there isn't any specific catalyst for a New Zealand Dollar pullback right now, I don't have any reason to believe this currency will be any different. It is also always about what has been priced in and what has not been priced in. With the New Zealand Dollar, I'm not sure there could be any more bullishness priced in at the moment. Still, I'd like to see a NZD/USD break back below 0.8500 to confirm this outlook and open the door for an acceleration of declines. Elsewhere, I continue to keep my eyes on USD/JPY and EUR/CHF. USD/JPY had a nice little pop on Friday, but so long as the market holds below 103.50 on a daily close basis, I retain a short term bearish outlook and will be looking for one more big drop below 100.75 before considering the possibility of a broader bullish resumption. Meanwhile, EUR/CHF has separated a nice distance from its recent 1.2100 area lows, but so long as we hold below 1.2235 on a daily close basis, I will not rule out the possibility for a break of 1.2100 and retest of the massive SNB 1.2000 barrier. So let's see how March closes out and let's hope today's price action sets the stage for a significantly more volatile month of April.