Collinson FX Market Commentary- September 26, 2014 - Markets tumble

by Collinson FX on 27 Sep 2014 Collinson FX market Commentary: September 26, 2014

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Markets tumbled overnight, hit hard by Central Bank activity and Geo-Politics, boosting the safety value of the Dollar. The NZD crashed after threats of intervention by RBNZ Governor Wheeler. He jawboned the currency lower commenting the currency was 'unjustifiable and unsustainable'. He cited recent falls in commodity prices had not been reflected in the KIWI and thus he would act accordingly.

The KIWI crashed to just above 0.7900 after shedding 10% since July, somewhat contradicting Wheelers assertions. The AUD was also impacted by the rising Dollar and weaker commodity prices dipping to below 0.8800. The RBA has also upset the apple cart by threatening housing loan restrictions amid warnings of a growing housing bubble and the threat to the economy. Equities destroyed yesterday's gains and some. Russia is threatening to confiscate international assets which sent jitters through already nervous markets.

In the US, Durable Goods Orders collapsed by more than 18%. Perfect storm conditions prevail sending equities into turmoil and the Dollar higher. The EUR fell to 1.2750 while the GBP slipped to 1.6300. Signs of panic were setting in overnight and time will tell if it is an overreaction. The NZD currently trades 0.4830, 0.6200 and 86.00 against the GBP, EUR and JPY respectively. With the KIWI falling through successive support levels at 0.8050, 0.8015 and 0.7960 in the last two days, downside risk is higher than it’s been for months. Protecting your FX risk is as important, if not more than ever.

Collinson FX market Commentary: September 25, 2014

Stocks rebounded after a three day run of negatives. It must be remembered that all the bad news is still counterbalanced by Central bank extra mural activity. It was this realization and some good news on the housing front that spurred equities to reverse recent losses. New Home Sales surged 18%! This contradicted all recent housing data and encouraged the bulls out of their temporary hiding places. The Dollar resumed recent form, with the EUR falling to 1.2780, while the GBP slumped to 1.6330.

NZ trade data surprised many and enabled the currency to rally to 0.8070 without a closer look. The recent weakness in the currency must impact but it was a decrease in imports that glorified an improving number.

The AUDUSD bounced to 0.8860, still very low and following the recent trend. The NZD is trading steady against the European currencies, 0.4940 and 0.6310 against the GBP and EUR respectively. The NZDJPY cross is pushing back towards the 88.00 figure, spurred on by a weakening Japanese currency.

It is defiantly time for us all to reevaluate currency risk and start protecting the down side. We have seen the NZD consistently weaken over the last three months, with pressure still pushing a steady decline. We need to think about protecting positions against the worst case scenario instead of chasing aspirational highs.

Collinson FX market Commentary: September 24, 2014
An ocean of red ink engulfed markets from Asia through Europe and onto the USA. The trigger for this was disappointing Chinese and European Manufacturing data setting in place a wave of negativity. The Chinese Manufacturing PMI held above 50 but was weak enough to hit an already beaten commodity market.

The effect on commodity currencies was immediate and brutal, with the AUD and NZD all hitting new lows. The AUD slumped to 0.8840 while the Kiwi stumbled to a low of 0.8050 before rebounding a little. The KIWI will come under further scrutiny with today's trade numbers and Fonterra’s annual report. The all-important dairy giant is expected to cut payments to farmers thus hitting the local income and spending. US Manufacturing continued to expand but missed expectations while the Dollar eased to 1.2950 and 1.6390 against the EUR and GBP receptively.

Instability hits confidence undermining the consumer and demand. Manufacturing is impacted and bubbles will be the first hit. Equities have sufferers while poor demand is smashing commodity prices. Associated currencies will continue to be impacted and any long term trend will start to hit domestic economic fundamentals.

Look for NZ trade data to reflect this. The NZD is currently trading 0.4910 against the GBP, hitting a new year to date low. The NZDJPY cross also came off over night, falling from the lofty heights of 88.40 to trade at 87.60.

Collinson FX market Commentary: September 23, 2014

Chinese Finance Minister yesterday quelled speculation of a flood of monetary stimulus, despite deteriorating economic conditions, sending equities and commodities lower. This did little for the embattled AUD, which fell to 0.8870, under extreme pressure with the collapse in commodity prices.

The NZD was also under stress, testing 0.8100 on the downside, counter balanced by the euphoria of the incumbent election victory. The GBP staged a rally, after the digestion of the Scottish vote on Union, pushing back to 1.6350. In contrast the EUR remained stressed at 1.2825, hit by further weak economic data, with Italian Industrial Production and EU Consumer Confidence contracting.

In the US, Existing Home Sales fell 1.8%, confirming the recent weakness. The G20 Finance Ministers meeting concluded in Australia with a focus on growth but warnings that the Global situation was at risk due to extremely low interest rates and massive monetary expansionism. The NZDAUD cross benefitted, rising to 0.9120 on comparative weakness.

The NZDJPY slipped back a little bit to 88.10, but still good buying at these levels. The NZD traded strongly against the EUR at 0.6300 and slipped further against the GBP to trade 0.4940. This represents a 6 month low in the NZDGBP and could test lower on the downside.

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