RBNZ Cuts Rates: NZDUSD Rallies + The Gold Bubble

July 23, 2015

RBNZ Cuts Rates:
As expected, the Reserve Bank of New Zealand cut interest rates by 0.25% from Wellington this morning. I know that I’ve used the Auckland skyline as my cover photo for today’s blog, but how good does it look! …I apologise to any readers from Wellington that I may have upset.

The market was however looking for a much more dovish tone from Wheeler but with the jawboning toned down and the now standard line of:

“Some further easing seems likely.”

The Kiwi Dollar actually rallied quite hard across the board after the cut.

With NZD/USD having come off as much as it has over the last few months, the RBNZ was happy to remove the phrase:

“The level of the New Zealand Dollar is unjustified.”

NZD/USD Weekly
Click on chart to see a larger view.

Just how much the Kiwi has come off its highs is highlighted by the above weekly NZD/USD chart. The drop between the previous 2 support/resistance levels has been basically vertical!

NZD/USD 4 Hourly
Click on chart to see a larger view.

Zooming into the 4 hourly chart, you can see that price has also been capped by a short term bearish trend line. Following the rate decision, price spiked back into trend line resistance which also lines up with previously broken support now being respected as resistance.

An interesting place to possibly join the short train?

The Gold Bubble:
Gold today is looking at its TENTH straight day of declines. If it gets there, this would be the longest losing streak that the precious metal has seen since 1996!

Goldman Sachs head of commodities gave us this pearler of a prediction in the WSJ today:

“Gold Prices will drop below $1000 a troy ounce for the first time in more than 6 years.”

We all know the reputation of Goldman’s public ‘predictions’ but its interesting to look at a chart on the back of this.

Gold Weekly
Click on chart to see a larger view.

We’ve talked about it earlier in the week but that break of weekly support really is hugely significant. Following the ultimate doom and gloom scenario that a break up of the Eurozone could have posed, the price of Gold, the supposed safe-haven asset STILL fell. If Gold can’t find any strength in that market environment, what hope does it have once the Fed actually starts raising rates?

Gold Weekly 2
Click on chart to see a larger view.

Now zoom out again and look at what could be considered a fair value once you come close to being back in the early 2000’s trading range. You’re still looking at the possibility of huge falls to come, even lower than what Goldman are saying.

My opinion is that when the loudest gold perma-bulls and fiat currency doomsday predictors have all been shaken out and public sentiment finally turns bearish, then the bottom will be in. Interestingly enough, Friday’s CFTO sentiment data actually turned bearish.

Do you see that as significant?


On the Calendar Thursday:
NZD Official Cash Rate (3.00% v 3.00% expected)
NZD RBNZ Rate Statement (Less dovish than expected)
JPY Trade Balance
AUD NAB Quarterly Business Confidence

EUR Greek Gov Debt Crisis Vote
GBP Retail Sales
CAD Core Retail Sales
USD Unemployment Claims


Do you see opportunity in any of the ideas above? Let us know by leaving a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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