Intraday Market Thoughts

Kiwi on Life Support, Dollar Rallies Again

by Adam Button
Sep 24, 2014 0:40

The New Zealand dollar fell to a one-year low on Tuesday, taking out a significant technical level. The pound was the best performer as real money continues to return while the commodity bloc suffered. The calendar is light in Asia.

The New Zealand dollar twice briefly slipped below the March low to a one-year low after a swift slide in US trading. The 0.8050 zone of support is key. The second foray lower came after Fonterra cuts its milk price forecast but later the kiwi bounced to 0.8070.

Perhaps more importantly, a falling New Zealand dollar often demonstrates stress elsewhere in the system. In this case, it's in emerging markets and China as the Fed gets closer to hiking rates. The kiwi has fallen more than 700 pips in a two month span 4 times since the crisis. The average high-to-low drawdown in the S&P 500 during that period was 7.1%.

What's also becoming clear is the insatiable appetite for US dollars. The dollar came into US trading lower against the euro and pound but completely recovered against both. Dip buyers are abundant and will remain so in anticipation of a hawkish shift at the Fed.

That makes us wonder if we should be watching out for the thing no one expects – a dovish shift at the Fed. It sounds crazy but inflation has stopped rising.

Three events to watch for in Asia-Pacific trading are Australian Aussie skilled vacancies, the leading index from Australia and a speech from the Fed's George at 0130 GMT. 

 Premium subscribers were alerted 1 hr ahead of the Fonterra announcement to watch the 2 GBPNZD longs, 1 of which hit its final 2.0380 target for 350 pips and the other currently netting 180 pips and in progress.
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FOMC's Mester speech
Sep 24 16:05

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