There is a busy week in prospect for
Forex. Apart from the fact that Friday sees the all-important Non-Farm Payrolls
report from the USA, three of the most important central banks will deliver their
monetary policy statements and interest rate decisions.
On Tuesday morning, early in GMT
terms, the Reserve Bank of Australia (RBA) will make its announcement. While no
change in rates is expected, it is known that the central bank is keen to
reduce the value of the Aussie to assist exports, while its core rate, high by
comparison to other jurisdictions but low historically, is working against
that. One fear in reducing rates is that there will be a property bubble but a
report out last night has indicated that residential property planning approvals
have fallen by 11%, as against 1% expected, and the trend is downward. This
could have a bearing on interest rate thinking.
Then, on Thursday, we will have both
the Bank of England and European Central Bank (ECB) releases. No change in
rates is expected from either of these, but the feeling out there is that the
Bank of England could well be the first major central bank to begin to raise
rates and the market will be looking for
clues as to when this might happen.
The ECB and, in particular, Mario
Draghi’s comments in the press conference afterwards, will hopefully give some
further insight into intentions for combatting low inflation, which is a
bugbear of the ECB at present. Measures to deal with this state of affairs have
the potential to weaken the Single Currency.
Will
the RBNZ intervene in the market?
The chart at the top shows that the
Kiwi, or New Zealand / US dollar pair, is approaching a significant support
level. A report from currency analysts in the Bank of New Zealand (a private bank
and not to be confused with the Reserve Bank of New Zealand, which is the
central bank) contends that the only way for the Kiwi is down. In that regard,
they wonder if and when the RBNZ will intervene again in the market. When they
do sell Kiwis in order to weaken the currency, the authorities will attempt to
do so at a time when this will have the greatest impact, so that they are
spending their foreign reserves to the best effect.
Pushing the rate below the support
level shown above would be expected to trigger the stop loss orders of those traders
who are betting on a strengthening Kiwi. As stop loss orders on long trades are
sell orders, this would amplify any lowering of the exchange rate that might be
achieved. Let’s see what happens.
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