Techs – The market has finally taken out next support by 0.5010 (June 2002 highs) along with critical psychological barriers at 0.5000 today, to trade to 0.4975 thus far. With daily studies so heavily oversold, we contend that the market should find some support in here ahead of a necessary corrective bounce. On Friday we recommended establishing a long position by 0.5010 but our trade was never triggered. Today we will look to buy again using ATR (“Average True Range”). As contrarians, we often like to look at the ATR of an instrument to give us a better sense of compelling risk/reward trade ideas. This is a necessary step to take, particularly in the current markets where counter-trend trading can be so dangerous. Nevertheless, the best bull opportunities come within bear markets and as such, we continue to look for attractive counter-trend trading ideas. While the ATR only gives a trader an “average” projected range, it still is a useful tool to anticipate the full extent of a market move within a given timeframe. The current daily ATR in Kiwi comes in at 150 pips. As such we will be looking for an opportunity to establish a long trade on a test of the 0.4945 (0.5095 daily high minus 150 pips). Strategy: BUY @ 0.4945 FOR A 0.5380 OBJECTIVE, STOP @0.4780. Recommendation to be Removed if Entry Price Not Hit Monday.
Fundamental Catalyst – RBNZ event risk is out of the way with the central bank slashing rates another 150 bps to 3.50%. Although Bollard has warned of further reductions, much of the weakness has been discounted into the markets. Global equity prices while still tracking lower are showing some form of stabilization or at the very minimum, a slowdown in the intense liquidation as seen in previous months. Commodity prices have also been showing some constructive price action with gold starting to break higher and seemingly more and more in demand. The broad based USD gains have also look to have run their course for the time being and as such, at least over the shorter-term, there could be some value in trying to pick up some positive carry at current levels.
Fundamental Catalyst – RBNZ event risk is out of the way with the central bank slashing rates another 150 bps to 3.50%. Although Bollard has warned of further reductions, much of the weakness has been discounted into the markets. Global equity prices while still tracking lower are showing some form of stabilization or at the very minimum, a slowdown in the intense liquidation as seen in previous months. Commodity prices have also been showing some constructive price action with gold starting to break higher and seemingly more and more in demand. The broad based USD gains have also look to have run their course for the time being and as such, at least over the shorter-term, there could be some value in trying to pick up some positive carry at current levels.
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