RBNZD a sell on rallies
Yesterday, I posted on the shift in forward guidance from the RBNZ. With the RBNZ keeping the Official Cash rate at 1.75% for now the ANZ bank now see RBNZ cutting their cash rate to 1% by August. The latest release of the business confidence data yesterday came out worse than expected at -38.0. You can read the piece by ANZ on the data here. Here are some details from that report:
Turning to the detail:
A net 1% of firms are expecting to lift investment, down 1 point.
Employment intentions fell 2 points to +1%.
Profit expectations fell 3 points to a net 14% expecting profit to decline.
A net 40% expect it to be tougher to get credit, a deterioration of 2 points.
Firms' pricing intentions lifted 1 point to +27%. Inflation expectations were steady at 2.05%. A net 55% of firms expect higher costs, led by agriculture and construction.
Commercial construction intentions dropped back into negative; residential dropped off a cliff, led by Auckland.
Export intentions eased to be lower than any time during the Asian or Global Financial crises
ANZ now see RBNZ cutting cash rate to 1% by August. So, the bearish case is deepening for the RBNZ, but the RBNZ is going to blown about by larger waves in the financial global ocean with all the risks around at the moment, for better or for worse. Also, I came across an interesting statistic from Bloomberg which reported on the Kiwi's response in the hour following the business confidence report. the average response over the past year has been a negative reaction in the NZD.
The verdict for now is to look to sell NZD on rallies.
A look at NZDJPY with risks elevated across the world
There are a number of different options, but one chart that is interesting is the NZDJPY. Rejecting it's weekly pivot point on the weekly chart and 100 and 200 EMA up above that there is a safe place to put a stop with plenty of downside opportunity. The aspect I like about the NZDJPY pair is that if any of the risk factors in the world trigger, and there are plenty, a NZD bearish bias would be helped with a see haven JPY bid.
