The New
Zealand dollar against the U.S. dollar (NZDUSD), otherwise known as the Kiwi,
is hovering above a key technical indicator, the 200 period exponential moving
average (EMA) on the four hour chart (see above). This is as the market awaits
the latest monetary policy report and interest rate decision from the Reserve
Bank of New Zealand (RBNZ) later in the global day, or early morning tomorrow
in GMT terms.
In the financial
stability report issued on November 11th, the governor of the RBNZ,
Graeme Wheeler, identified three factors that were influencing monetary policy
decisions at his institution. These were global financial stability, for which
read the situation in China, on which nation New Zealand is dependent for its
exports of dairy products; the pressures on the same dairy sector, and in particular
the hardship being faced by over-indebted dairy farmers; and the runaway
housing market in the major cities, Auckland in particular.
These
represent competing forces in terms of interest rate drivers. On the one hand
the government would like to reduce rates to lower the value of the currency as
an aid to exports, and to reduce the pressure on indebted farmers, but on the
other hand are greatly fearful of a housing bubble, which is a motivator for
keeping rates high.
After three
reductions in the Official Cash Rate (OCR) so far this year, the decision to
make a further one on this occasion rests on a knife-edge.
Short-sellers smell US shale oil producer
blood
Yesterday
we alluded to the efforts being made by Middle-east oil producers, and
Saudi Arabia in particular, to kill off if possible the threat to their
domination of the oil market being posed by shale oil producers in the U.S.
They are doing this by relying on their cash reserves to allow them to further lower
prices by keeping production up. This, they hope, will place shale oil
producers in a loss-making position, leading to their demise.
Now an
article in the “The Australian” (“Shorters
line up with OPEC to kill off US shale oil”), by Robert Gottliebsen, has it
that short sellers have joined the fray. According to the article, hedge funds
have now created an extremely large overhang of short positions in oil futures
in what it characterises as “ … one of the biggest shorting raids in history”.
Not content
with selling oil futures, the hedge funds are also said to be selling oil company
and other mineral producer shares. Could all of this be setting up a major
contrarian opportunity when and if the shorters are forced, for whatever
reason, to cover their positions?
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