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Whats happening with the KIWI and how to trade it

WHAT IS HAPPENING TO THE KIWI?

KNOW YOUR TRADING FUNDAMENTALS

RBNZ LATEST ANNOUNCEMENT

The Reserve Bank of New Zealand (RBNZ) cut interest rates by 25 basis points from 3.25% to 3.00% last week. So many of my traders asked me why did the kiwi go higher. This just does not make sense, I wanted to shed some light for Forex traders that are new to trading Forex and who want to learn to trade forex well.
Always understand the currency that you are trading inside out. 95% of the news is always priced in and this is what fundamental traders do. The only reason the price moves dramatically is if there is a surprise. So when the RBNZ did cut the rates by 25 basis points. Traders were expecting a further cut, but let’s have a look at other reasons the kiwi pushed higher.

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Important factor number 1 :

Trade Balance:
New Zealand has been printing a trade surplus for the last 5 months and in June they took a turn for the worse from 371 million to -60 million.This is not the end of bad news for the kiwi,for the traders that are unaware 25% of New Zealand’s exports are composed of animal products i.e., fresh cheese,butter,cream etc. and one of the biggest contributing Fundamental news events is the GLOBAL DAIRY TRADE PRICE INDEX. This particular index has been slumping for around 9-10 auctions.The latest drop was around 10%.Not looking good at all. New Zealand also exports metals such as iron and aluminium, yet again the aluminium prices were down by 6.4% along for the third bad month for the ANZ’s commodity price index slumping by 3.1%.

Important factor number 2 :

Consumer Sentiment:
The consumer confidence index slid to 4.2 points, guess it is still okay not too bad but the general consensus was that consumers were not confident at on the economic times ahead due to the lack of faith in the government policies. Well, that’s what you get when you have a gambler
running the economy. The employment confidence also fell slightly for the 2nd quarter by around 5.8 points which again adds to the overall confidence.

Important factor number 3

Business conditions & Sentiment
The business confidence survey showed a decline from 15.7 to -2.3 and this is the first time we have seen this since 2011.I guess as you can see the nations exports depend on dairy and as I said previously when these decline it affects overall business sentiment.

Important factor number 4:

NZ Business Confidence
The manufacturing sector was also pretty downbeat with a reading of -16.9. All sectors were optimistic in terms of investment, except for the agricultural sector since it printed a -15.5 reading. That’s probably because it makes no sense for an investor to invest his hard-earned on a sector that is seeing more competitors and shrinking demand.
The New Zealand Institute of Economic Research (NZIER) also released its own report, and it followed the ANZ’s downward trajectory, although its readings weren’t as pessimistic since the actual reading printed a 5.0 (23.0 previous).

Important factor number 5:

Inflation
Q2 2015 CPI saw some improvement, rising by 0.4% after dipping by 0.3% last quarter. Surprisingly enough, the primary driver for inflation was the transportation group due to an 8.8% increase in petrol prices and 11.0% increase in diesel prices, thanks to higher crude oil prices and a weak Kiwi.The main drag to inflation was the communication group which printed a 1.9% decline in telecommunication services “influenced by price falls and better value plans.” Food products were also a major drag, thanks particularly to an 8.7% drop in seasonal fruit prices.

Platinum SENTIMENT ON KIWI: BEARISH

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