NZD - A disaster waiting to happen

Wow, very good call! Falling like a rock!

I was going to try and trade this manually, as I was unsure of which way it was going to head. Before I could even move my mouse to click the button it had dropped from from .8325 to .8291 in matter of 2 secs.

I hope lot of you who share my vision made money on AUD/USD over the last 2 days. I am up 110 pips on my AUD/USD trade. I did not move my stop it stays at .8466. I will wait for the trade to hit my target of .8000. I can still lose this trade.

When you trade professionally, you analyse the trade set up well in advance & when the opportunity arises then implement it properly. You have to be decided in what direction you want to trade. You cannot say, if it does this i will do this, if it does that i will do that. That is reciepe for failure in the long run. Calculate your risk & reward & then trade in the direction you have decided. You need to enter the market before the crowd. No point trying to scramble at the time of news to get few pips. Don't be changing your mind. If you lose so what, you have taken acceptable risk. There will be other opportunities to win.

I started this thread to show the crowd how to practically implement fundamentals. I know so many analysts & guru's who have nothing else to offer but hollow talk. They will keep on writing or talking on & on without even telling people how to use that info specifically for successful trading.

Anyway congrats to everybody on their success. Now i will wait for NZD interest rate decision on wednesday. I will have my plan for it in the next day or two.

KAZAM

I just started reading this thread this afternoon. It's wonderful. Thanks
Kzazs. I can really understand your reasoning and it is teaching me alot. Luckily, I shorted AUD/USD a while ago for a few pips after the huge fall.
Wish I had read this thread before I started, I may have had the guts to stay in longer. Been watching NZD and AUD for a couple of weeks now. Each time I thought it was near a reveral, it went on to dizzying heights. It's
gotta give sooner or later.. I hope to get courage to stay in trades longer
and your advice may be just the help I need. Thanks K and everyone who
contributes here.
trademeister

kzazs

you had mentioned you were going to move your stop loss to break even when you were 50 pips profit, i think?. Why not now when you are 110 up ?

thx

I was only going to change my stop to breakeven if i was 50 pips up before the AU CPI. In case CPI printed more than the expected figure then there would have been a likelihood of RBA raising rates at their next meeting. That would have negated my trade.

As i was not up 50 pips before the CPI report i left my stop at the original level. As the CPI figure was less then expected, the chances of RBA raising their rates at the next meeting is Zero. Therefore the AUD will have a downward momentum. I will give my trade a breathing space so that it can reach .8000 profit level

KAZAM

kzazs,
What's your take on the lack of follow-through weakness post-CPI? With the combination low CPI and 2-month trendline break, I thought the sell pressure would be a bit stronger than what we're seeing. Instead, it has been rising steadily since bottoming on the CPI news.

Look at that sweet head & shoulders on that MACD ! Look to short IMO

I think alot of the lack of follow through had to do with alot of the poor news out of the U.S yesterday.

It is not just US weakness, look at the other AUD crosses. GBP/AUD and EUR/AUD have nearly retraced the full CPI sell-off. AUD/USD just completed a full 100% retrace..

I was waiting 47 for a short finally went in at 34 with a 61 stop

Also shorting here at .8341 on a pullback to the 2-month trendline broken yesterday, stop at .8380.

Why is everyone trying to short something that has trended long for 700 pips within 7 weeks?

Don't you want the trend to be your friend anymore?

We finally broke out of a capped range in March which held 4 years and now after not even 2 months everyone is trying to short it back down already?

Hehehehe, just saying...think about what the chart is telling ya

The move back above 0.8265 was a buy (went 75 pips so far, personally I missed it due to also being stuck in the "it must drop more!!!" logic...duh...).

This is a pair that earns quite a bit of interest to anyone long - would long term players sell or buy this pair?
This also applies to the original topic - NZDUSD

I'll think about selling again when we break 0.8230.

My first 47 was finally the good entry i put some more at this point.
Target 100 pips down ( scaling out half at this point)

Should go down technically according to my system

With the low CPI the market seems to have discounted any interest rates for the rest of the year. So I think long term players will be looking to sell (just my opinion). From an expectation of 50% interest rate slashed to zero and the dollar being pushed through 8000 on that expectation my monthly strategy is to see the dollar drop back to around the 8000 - 8100 level.

Although we all know how dangerous it can be to say that it can't go any higher, looking at the changed, long term interest rate forecast you can't see it breaking new 15 years highs. It's looks a good Risk reward trade at the moment as the prices seems to be using the daily trend line for support. Personally I will be using this as a good sell with SL at 8405.

The 8230 would make a sell more certain but you may need to ride through another retrace with a greater loss potential. Personally I see a better SL at the 8405. If we enter the market now with this SL you are seeing only a 70 pips SL with a possible 300 - 400 gain.

?

http://www.dailyfx.com/images/standings-australia.gif AUD 6.25%

http://www.dailyfx.com/images/standings-nzd.gif NZD 7.50%

http://www.dailyfx.com/images/standings-usa.gif USD 5.25%

Making differential for AUDUSD => +1% already
for Kiwi => + 2.25%

and vs http://www.dailyfx.com/images/standings-japan.gif JPY 0.50%

They would be 5.75% and 7% interest...

Hikes or not, AUDUSD and NZDUSD will earn interest even against the USD right NOW. That was my point. The crosses NZDJPY and AUDJPY make you even more.


Assuming a steady course or possibly cuts for the USD this can only increase the demand for the base currency pairs. Now I've no clue about the real fundamentals, and I don't want to have one, really.

But I still have 7 bullish weeks and a strong monthly close on my charts and know that holdong longs will earn money while holding shorts costs money.

As for the intra-month/week/day trading, that's a whole new story, but to me I still don't see a reason to think shorts will go further than longs just yet..

Sorry i could not post earlier as the Forex factory server was down. The AUD has retraced the losses since the CPI report, but the chances that it is going to newer highs is remote, as low PPI, Low CPI, Low inflation has taken the wind out of the sails of AUD. I at present think my stop at .8466 is safe for the moment.

I agree you earn interest based on interest rates differential, but the professional traders are proactive not reactive. The interest rates for AUD are definately not rising at the next meeting, but who is to say that USD will stay in the doldrums forever. Look at CAD against all curriencies, what happened suddenly to it. It was depreciating big time, USD/CAD 1.1900 to 1.1140, EUR/CAD 1.5700 to 1.5170, GBP/CAD, AUD/CAD, CAD/JPY & the list goes on & on. What happened to our friend "THE TREND"

Trading against fundamentals can be very detrimental in the long run. You can have a currency shed off thousands of pips in 3-5 days. JPY trades & NZD trades presently are against the fundamentals.

Now back to NZD/USD, i entered short well before the interest rate announcement at .7465. Stop at .7600. Roughly 100 pips above the highest for the last few days. First target is at .7100 & second target at .6900. One full lot. Risk to reward 3.5 to 1

I know people will say it is suicidal to short when RBNZ has raised the rates. MY answer is you need to be thinking differently from rest of the crowd.

My points are:

1. As the rate is increased, no more rate increase now for atleast two more meetings.

2. Traders are going to go long on NZD/USD pair, thats where sometimes big market players trap novice traders. Keep in mind this trade (going long) is totally against the fundamentals. NZD is so overpriced that it is going to sent NZD into recession if they dont stop increasing interest rates.

3. The business community & the Finance minister will have their daggers out at the RBNZ governer. Just wait within the next few days the Finance minister is going to come out with a strong worded warning, & the governer will defend himself by justifying his steps & then try to find ways to get NZD down.

For me these reasons are enough to short. If my stop is hit, i will accept it as a well calculated risk & then move on to other trades.

Just for the information when every body was going long on USD/CAD, i was shorting it. I have made 500 pips on that trade, roughly about $ 4500 dollars. This is the strength of fundamentals.

Few trades
No sitting in front of computers, check once or twice a day.
Make gains with risk to reward ratio of 3.5-1

KAZAM

The officials in RBNZ would have definately known about the details of trade balance being announced in the next 45 minutes before increasing the rate.

Dont get trapped at the release of trade balance. I think many people would have inside knowledge of this figure.

Goodluck

KAZAM

I wanted to short NZDUSD before the news. However, there were no market feelers of "risk aversion" so I did not.

This means, the market is still high on risk appetite. Perhaps NZD Trade Balance will tip the scale. We cant say.

NZD now has the highest Interest Rates making Carry Traders want to put money here or perhaps avoid altogether as well considering the big possibility of a correction downwards.

Surely an opinon based on fundamentals is best acted upon when corresponding price action can be found?