Giles Coghlan LLB, Lth, MA
Financial Source
Trade the strong against the weak
One of the key trading principles to really embrace in the FX world is that of pairing strength against weakness.
So, yesterday we had a good example of putting this into practice via a central bank policy decision. This was the decision by the RBNZ.
Going into the RBNZ interest rate decision, you may ask yourself what to do before the RBNZ rate meeting. The answer is simple, you are going to wait. Waiting for the central bank to show its hand. The RBNZ has now done that and that is what gives us a bearish bias.
Yesterday, after the decision we posted this outlook.
Reasons for NZD weakness
The RBNZ launched a set of very bearish policies extending its asset purchases programme. They increased their quantitative easing (LSAP) programme to $100bn from $60bln. Prior to this meeting, there were no expectations of an extension in their bond purchases. Furthermore, they extended the length of the programme from 12 to 22 months. To top off the bearish outlook the RBNZ then expressed a preference for a lower or negative official cash rate as well as a Funding for Lending Programme'. AN extremely bearish position.
So, we now have a short to medium term NZD weak bias, look to pair it with currencies as they show strength.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
AUD/USD remains heavy near 0.6750 after Australian jobs data
AUD/USD remains under intense selling pressure near 0.6750 in Asian trading on Thursday. Mixed Australian employment data fails to inspire the Australian Dollar while the US Dollar extends the post-Fed recovery amid a cautious market mood. US data awaited.
USD.JPY jumps toward 144.00 on the road to recovery
USD/JPY gains traction and approaches 144.00 in Thursday's Asian session. The uptick of the pair is bolstered by the impressive US Dollar recovery. Investors shift their attention to the US data and the Bank of Japan interest rate decision on Friday.
Gold price stalls post-FOMC pullback from all-time peak; lacks firm intraday direction
Gold price oscillates in a range on Thursday and consolidates the previous day's post-FOMC rejection slide from the $2,600 mark or a fresh record high. Persistent geopolitical risks, along with signs of economic trouble in the US and China, lend support to the safe-haven metal.
Ethereum attempts recovery following first rate cut in four years
Ethereum is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds recorded $15.1 million in outflows.
Australian Unemployment Rate expected to hold steady at 4.2% in August
The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.