NZ$ Index

Strange as it may seem there doesn't to be an existing thread...

Because we are mainly focused on what the media tells us..eg the rising of the NZ$ near parity with A$, the increasing NZ$ value over the Sterling and EURO, and the Reserve Bank telling us the NZ$ is well overvalued, we are left with the feeling that in general the NZ$ overall trend is bullish and rising...but with closer inspection its not true as NZ$ has fallen very significantly..surprised? personally I was surprised as to the magnitude of the fall since last August...

The problem with currency wars is the devaluation can be nullified when the trading partners currency lower at the same time..

The assumption from the NZ$ index chart would be that when we are told that the NZ$ is appreciating against the EURO and $A it means those currencies have been falling faster than the NZ$

As we investors are dealing with variables the situation can change quickly as the chart shows the NZ$ has broken support on the 20th January and yesterdays NZ$ large drop (yesterday is not shown on the chart) against most currencies except Canadian and Aussi is now much easier to explain why...The investor perception is these Commodity export countries are starting to feel pain....

As a strong currency usually reflects a strong economy, does this NZ$ index chart give the investor some sort of advanced warning that the NZ Ecomony has peaked and this Economic Rockstar ship could be heading towards the rocks?...you decide...

EDIT:...The NZ Index chart (from Stockcharts) looks very familar to that of the NZ$/US$ chart...

http://i458.photobucket.com/albums/q...2020012015.png

Certainly does Hoop.Theres still a lot of Kiwis with there head in the clouds still

Wonder what makes up this NZ$ index (assuming a basket of currencies)

Just that it looks more dramatic than what the TWI looks like
http://www.anz.co.nz/personal/migran...raphs/nzd-twi/

Another rise due?

Or a few more %age drop if Wheeler surprises with a rate cut

Quote:

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Originally Posted by winner69

Wonder what makes up this NZ$ index (assuming a basket of currencies)

Just that it looks more dramatic than what the TWI looks like
http://www.anz.co.nz/personal/migran...raphs/nzd-twi/

Another rise due?

Or a few more %age drop if Wheeler surprises with a rate cut

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Seems overly weighted to USD. Recent RBNZ TWI change up gave the USD less weighting and upped the Yuan quite heavily to reflect our trade with China.

Yeah I agree..it looks very overweighted to the US$...Why would that be??
Has the US$ bias anything to be with US$ being the international currency??
The RB chart below (updated 31 Dec 2014) shows the difference between NZ$/US$ and the TWI

http://www.rbnz.govt.nz/images/key-g...Fig8_large.jpg

From the above chart 5 things stand out.

1....Notice the 3 currency dips 1992 2001 and 2008...they all occurred within painful recessions...Deduction..anyone wishing for a big drop in the NZ$ would be wishing for a recession...
2....The correlation between the TWI and NZ$/US$ is very good
3....From eyesight, there seems to be sometimes a slight lagging effect with the TWI..Hence the NZ$/US$ (leading) could be used as a possible predictor variable.
4....With the tight correlation as outlined in 2 & 3 ..the recent drop in the NZ$/US$ should be seen as a precursor to the New Zealand TWI ...the recent short term diverging TWI bump up which quickly ended this week [red line] suggests the correlation is still working and the divergence was some sort of short term anomaly, assuming this then you would have been expecting the market to correct itself and move down..a great forex trading opportunity..eh?
5...The NZ$/US$ has broken a support line which defines bull/bear territory..a bit too early to assume a cyclic reversal and the uptrend (strengthening NZ$) has ended. Near future action would either see the TWI following downwards and confirming, or the US$/NZ$ correcting to resume the trend back up signaling a bear trap.

EDIT:...of interest...If the devaluing NZ$ accelerating is real and continues..then it may go faster than the A$ devaluing speed.....bye bye parity party?:(

Quote:

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Originally Posted by Hoop

Yeah I agree..it looks very overweighted to the US$...Why would that be??
Has the US$ bias anything to be with US$ being the international currency?
... ....
EDIT:...of interest...If the devaluing NZ$ accelerating is real and continues..then it may go faster than the A$ devaluing speed.....bye bye parity party?:(

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Thanks Hoop,

The trends for NZD are of high interest.

For me the overweight US bias is OK as Global Stock markets are overweight US and also I assume the NZ Super Fund portfolio.

Would appreciate views from anyone about a suitable strategy for managing the global section of an individual portfolio that is invested in managed funds.

Currently hold the two unhedged funds shown.

If NZD switches trend and starts to go down then unhedged is best, if not and January upward trend continues then the reverse.

Assume costs to switch are .75%.
Assume the funds hold pretty much the same asset allocations.

Context: RaboDirect offer 46 managed funds online, please refer data table extract below.

At the end of January 2015 the best performed funds (short term 1 month) included the unhedged global funds. (NZD down against USD and EUR)

At the end of February 2015 the Hedged Funds were now much better than unhedged. (NZD up against USD and EUR)

Data Extract from 28 February 2015 RaboDirect Performance Report


Fund Name -------------------------------------Ranking --------1 Mth -------3 Mths --------6 Mths ------12 Months

AMP Capital Core Hedged Gbl Shares -------1 of 46 --------- 6.19% ------4.80% -------------7.88% -------15.95%
Nikko AM Global Equity Hedged Fund -------2 of 46 ---------5.07% ------- 5.07% ------------7.79% -------16.06%
Nikko AM Global Equity Unhedged Fund ---23 of 46 ---------1.11% --------6.18% ---------12.93% --------18.80%
AMP Capital Core Global Shares Fund ------26 of 46 --------0.94% ---------6.56% ---------14.28% ------19.53%

Options include:

1 Status Quo
2 Switch all to unhedged
3 50% 50% hedged/unhedged or some other split

Thanks and regards

Hi,

Firstly acknowledgements to www.forexcruch.com for their chart and weekly forecast comments.

This chart shows the exchange rate changes that impacted relative AMP and Nikko Global Hedged and Unhedged funds, % performance in USD for January and February 2015.

Forexcrunch Live chart below of NZD/USD as at 2 March 2015:

"Technical lines, from top to bottom:

0.7715 was stronger support after serving holding the pair in December. 0.7680 worked as support in December and that is where the pair stopped in early January 2015.

Below this point, we are back to levels last seen in 2012: 0.7615 now works as resistance after providing support during January 2015. It is followed closely by 0.7585 which capped the pair on an initial recovery attempt"

Live price now is .7587

So what happens next?

Regards



PS: This post is not financial advice.

That, my good man, is a "Bear flag", so the most likely scenario is an eventual breakdown out of the rising consolidation. It could have another couple of cracks at the top of the range before this occurs.

Attachment 7171

E & OE, of course

Actually, looks more like a rising wedge, but the proposed outcome is the same: it's a consolidation after a sharp move, to be followed by a resumption of the prior trend

Hi Xerof

Thanks for this.

I appreciate your information.

Current quote:

0.7553 -0.0037 (-0.49%)

Down from .7587 in my earlier post

Regards

[QUOTE=Xerof;562857]That, my good man, is a "Bear flag", so the most likely scenario is an eventual breakdown out of the rising consolidation. It could have another couple of cracks at the top of the range before this occurs.

Hi,

What a good call you made Xerof.

Was .7587 on my post of 5 March 2015.

Now .7356 .

That's down 3.04%..

Thanks and regards

Now 7250 - Another day, another cent or so lower.

The TA theory says, the whole move, once the flag or wedge is broken, should equal the height of the previous "flag-pole", after which followed the consolidation period that formed the flag, and then it finally broke down out of the flag formation for another kaboom.

On that basis, this move eventually should reach a bit under 70 cents, maybe as low as 67. (I haven't done a calculation, just a visual) but not expecting that to happen in a straight line

I do note too that we have seen lower highs/lows all the way from the top so far, so it is relatively safe to stay short KIWI until that changes

Wheeler will be pleased with progress (perhaps it was them who initiated the flagpole, and again lobbed a few out late last week?) (I will never know.....:p)

E & OE as usual for FX comments

12/3 evening - post RBNZ statement has seen the market wrong footed and a good old short squeeze is in play. Never a straight line..........