POSTING DATE: 27.01.2022
CORE POSITION TRADE: CP29
EXPECTED DURATION: through 2022 into 2023
5 MINUTE ZOOM VIDEO UPDATE: 2nd February 2022
ZOOM VIDEO LINK: CP29nzdusd01052022
DEMAND FOR COMMODITIES POST PANDEMIC
The 2020 Covid-19 pandemic saw the FED step on the gas pedal with regards to monetary easing, cutting interest rates and delivering huge amounts of liquidity to the markets via their Repo Operations and Quantitative Easing. As a result, the USD saw safe haven inflows during a very strong RISK-OFF environment. As Covid-19 became more contained and supply chain issues along with wage inflation caught a grip in the U.S. economy the FED has now announced a HAWKISH turn with regards to Monetary Policy starting now.
On the other side after a prolonged period of the RBNZ talking down the NZD, the RBNZ was the first major Central Bank to turn HAWKISH.
Whilst, the RBNZ always wanted to operate within a target range ensuring that export prices remained favourable, given the economic recoveries around the world the RBNZ was forced to start a process of normalization first albeit quite slowly so far.
The Kiwi dollar theoretically should perform better than the USD, but the big RISK factor to consider is that of a move lower in equities and other RISK assets. As we know in this environment the NZD underperforms.
I believe the downside RISK for this pair is for Q1 2022.
I firmly believe that moving forward as commodities will drive economies it is the commodity-based currencies that will benefit the most. Albeit it means that the currency will strengthen as a result.
At the time of loading this (CORE) POSITION trade, I currently have 2 x “LIVE” RADAR trades.
I am going to absorb these trades as (CORE) POSITION TRADES for the purpose of tracking and accounting.
The STOP LOSS and LIMIT levels will be adjusted to reflect the fact that the trades will be reviewed until a longer-term approach and strategy.
We have a BEAR FLAG in play that has a measured move to 0.6350. Between current price levels and the measured move objective the have an area of about 150 which hosts many previous horizontal support and resistance levels.
On the WEEKLY CHART the candles produced since the BEAR FLAG became a relevant pattern have been very BEARISH, and the moves correlate directly with RISK OFF that has captured the equity markets following the announcement that the FED is going move Monetary Policy away from accommodative to tightening.
- We have a BEAR CHANNEL in play.
- Key support lies, in my opinion, between 0.6510 and 0.6375.
- We also have a BEAR FLAG in play with a measured move through to c.0.6350.
- Looking towards limit order targets. We have a target range of 0.7550 thru 0.7680 which lies confluences with the 61.8% Fibonacci retracement level of 0.7554. This is measured from the July 2014 highs of 0.8842 from the Covid Lows of March 2020 at 0.5473.
- It is always a little “HIT & MISS” setting longer-term target objectives, but these lies only c.180 pips higher than highs seen in early 2021 just beyond 0.7400.
Q1 2022 REVIEW:
TRADE PERFORMANCE SO FAR:
CURRENT LIVE & LIMIT ORDERS: