Nov21 – AUD/NZD/CAD weakness following RBNZ and RBA comments (Market Analysis)

Markets overall

Equity markets rallied a bit yesterday.  Gold continues to be bearish – still below $1,250, trading $1,240 now.

FX Markets

A turnaround yesterday – which I believe is important – USD and AUD have lost two points each.  EUR and CHF have both gained 2 points.

RBA and RBNZ see their currencies as overvalued – RBA has made several comments in the past two days that they see their currency as overvalued, likewise the IMF made such a comment on Wed (saying that it was 10% overvalued).  Further RBNZ commented that it saw the NZD as overvalued.  Consequently there has been a lot of weakness in NZD and AUD.  On this basis I would be reluctant to do anything other than sell both currencies, regardless of their STAM ranking.  I would expect the STAM ratings of both to weaken considerably in the coming days (note that AUD has already lost 2 points, NZD is still steady on 12 points).

STAM setups

JPY is weakening significantly.  STAM is not quick enough to catch these unfortunately.  There are barely any retracements on the 4H chart, let alone the daily charts.  Thus I am trying to take advantage of the weakening in the JBT trades (and I am managing to do so).  The Yen pairs are thus rallying significantly, but it’s not possible to get long using S1 or S2. 

The story is the same with the AUD and NZD pairs – which either invalidates the NZD-related S3 setups, or prevents the type of pullbacks required to get into S1 or S2 trades (such as AUDUSD [S2S], GBPAUD [S1B], AUDCHF [S1S], GBPNZD [S2B], EURAUD [S1B]).  CAD is weakening in a way similar to AUD – thus there has been no pullback for USDCAD [S1B]. 

The final remaining potential setup is GBPCHF – on this there is actually a pullback on the 4H chart right now – so I will keep an eye on this one for 3pm.

S3 setups

All NZD setups need to be disregarded because of the RBNZ comments.  And all the other setups involve either CAD or AUD – and many will be overbought/oversold, however I am not going to trade against the short momentum across the board.  CAD, AUD and NZD are falling against every other currency and thus it would be suicidal to stand in their way.  The better way to trade this momentum would be to look for pullbacks on the 1H chart.  But that would be a different strategy all together.

Action points

Check GBPCHF on close of 3pm candle.


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