this is my idea in bitcoin for aprilthis is my idea.
i think we have there great RR.
dont forget about rate hikes. :)
Federalreserve
Sterling falls below 1.23The British pound has stabilized on Friday, after sustaining huge losses a day earlier. GBP/USD is trading at 1.2342 in the European session, down 0.11%. Earlier, the currency fell to 1.2276, its lowest level since June 2020.
The BoE dutifully raised interest rates at its meeting on Thursday, but the market reception was a chilly one. GBP/USD plummeted a staggering 2.21% on the day. Investors gave a thumbs-down to the grim message from the central bank, as a fourth straight rate hike in as many meetings became an afterthought.
The BoE's growth forecast for 2022 remained at 3.75%, but it slashed the 2023 projection from 1.25% to -0.25%. At the same time, the central revised upwards its inflation forecast for Q4 to above 10%, up from 8% in an April forecast. The 'double-whammy' of higher rates and a deteriorating economic outlook sent the British pound reeling after the BoE meeting.
The rate decision was a 6-3 vote, with all three dissenters voting in favor of a 0.50% rate hike. This surprised the markets, which had expected an 8-1 vote. There is a deep split in the MPC, with Governor Bailey acknowledging after the meeting that an uncertain economic outlook had led to a range of views in the MPC. Such a statement can hardly be expected to instill confidence in the British pound on the part of investors.
In its policy summary, the BoE signalled that more rate hikes are coming, and also dropped the word "modest" to describe upcoming rate hikes. Yet the markets were not impressed - the 0.25% increase was modest, and with the BoE warning about 10% inflation, it's clear that it will take quite some time before rate hikes do the job and wrestle down sizzling inflation.
The US dollar initially lost ground after the Fed rate decision on Wednesday, as investors seized on Fed Chair Powell's statement that the Fed was not considering a 0.75% rate hike. The greenback has since bounced back, as the markets digest that the Fed plans to be aggressive with further 0.50% hikes in its battle to bring down inflation.
There is resistance at 1.2612 and 1.2719
GBP/USD tested support at 1.2272 in the Asian session. Below there is support at 1.2179
Microsoft - End of an era / back to the 80sPRIOR BEAR MARKET
After such a disappointing day across all markets, Microsoft of all names is now showing signs of topping out. The first time since 2000. Back then, Microsoft corrected over time rather than just in price. Taking 9 years before finally capitulating for a 62% total decline. Given it’s gradual ascent in recent years, something similar may now lie ahead.
CURRENT PRICE ACTION
A close below $262 and Microsoft will paint a sell / short signal. RSI has already crossed into a bearish zone (below 40) on the weekly timeframe, suggesting an almost inevitability to downside price action.
Like AMD, MSFT is showing signs of topping in the exponential channel (shown in the main chart above) and has closed below the top of it twice in the past 6 months. Next step for confirming the bearish case, would be to fall below the 50 week MA of $262.
BEARISH TARGETS
Assuming this happens in the coming days, we can start talking about targets. The top of the purple consolidation area, became a firm bottom last time around. If this were to play-out again this would represent a 70% decline, at a price of $78. The 0.618 fib retracement sits at $105 if you find comfort in a more reasonable and less aggressive target.
BULLISH TARGETS
If this one doesn't go as anticipated, a close above $310 would prolong and delay the bearish thesis. Regardless, MSFT is looking awfully toppy here, with a price to earnings ratio of still 31.9. Take profits and stay clear on buys at the very least. Any further upside is limited. Let's keep an eye on this one for the next 5-10 years…
SIDE NOTE
This chart has traded so textbook perfectly since 1986, that it has made for such simple investing and a near-perfect case study for this exponential indicator. If you'd acquired a position for $2,000 back then, you would be sitting on $10,634,879, with still an open position of $101k. Astronomical gains.
Officer Omicron and Insurgent Inflation Team Up To Fight the FedScene 1
Darth Powell summons the legends of the past to formulate the plan to fight the Omicron and Inflation insurgence.
Brigadier Bernanke, General Greenspan and Veteran Volcker report for duty.
“We are at an event horizon, what should we do?” declares Powell.
“Pretend it isn’t happening”, says Greenspan
“Bailout everything, print more money,” says Bernanke
“I killed inflation forever, this cannot be happening,” says Volcker
Powell rises from his throne and addresses the senate.
"There is nothing to see here. We will continue as normal, and start to cool off our insurgent inflation with the ice bath of interest rates, and the tepid taste of tapering."
In the background the sound of screaming.
Cut Scene 1.
Scene 2.
The morning after a sweet night of passion, Omicron and Inflation wake up with a hangover and get to work on terrorizing the economy. Officer Omicron has already infected 30% of the planet and inflation is rampant.
Cut Scene 2.
Well, that was exciting, but if the global economy was a star wars movie, it would be something like this.
A big gap down today, and the short-term outlook is definitely to the downside, with limited room for stimulus, and unlimited room for inflation, virus infections, and lockdowns.
Short-term RSI – Nasty
KST – Nasty
AD Ratio - ouch
Choose Your Ending
Scene 3.
After two hard years the people of Naboo (earth) are battered yet determined to summon the force to fight whatever stands in their way. It will be tough, but we will beat nature and fight to live another day. 15% to 20% drop in equities, a collapse in crypto, followed by a green revolution where we live in ESG harmony.
Scene 4.
Mother natures death star finally scourges us to hell causing the next great depression, which takes an entire generation to recover from. (Like the 2000 dotcom bust 8-year recovery)
Scene 5.
Darth Powell farts, and the world goes on as normal 😊
Cast your vote now.
Scene 3, 4, or 5.
If you like, then hit like.
Barry
This is A Bear Market Rally, Be CarefulWe saw a strong move to the upside after the Fed hiked interest rates by 50 basis points yesterday but does that mean that the trend has reversed? Most definitely not! Watch this video to see my forecast and what we need to see before we can assume a trend change.
Happy trading!
Linton
Today's Closing on a local Triple Top - Where to Now?Given the somewhat bullish news from the Fed today, a rate hike of only 50 basis points and no larger hikes in the near future, things seem to be looking up.
The news gave way to a major rally midday, erasing losses since- well, last Monday.
However, it should be noted that the fed slipped in a dirty curveball: in June it will start a multi-trillion dollar balance sheet runoff starting June 1st.
In the month ahead, it should be expected that the market will be trying to gauge what this will mean for them.
As a hint, the last time the Fed dumped its balance sheet in response to extreme economic conditions was in December of 2008. October's decline caused a run-up in the fed's balance sheet as the housing market began to tilt sideways. When things seemed stable, the Fed ran off nearly 20% of its holdings in the 2 months following- before the stock market reached its lows that following March. This coming runoff isn't nearly as drastic, as the fed maintains a $8.9 trillion fund and is only giving up $47.5 billion a month for the first three months, and $90 billion for the next three. This equates to only a 4.6% drop, over a much longer period of time.
Will the balance sheet runoff be enough to curb inflation? Only time will tell.
However, I take it as a sign that we've not yet hit the bottom in this market.
Continuing this thought, let's look at the hourly chart for the S&P 500.
We're seeing some resistance at the 4300 mark. We seem to have closed on a Triple Top, and today's rally wasn't enough to blow past this target ( again! ). The previous two times we've hit this figure, it looks like we've declined by 3% & 5%. My best guess is that if tomorrow does not carry this rally's momentum higher, we'll be seeing a 8% decline from here by Monday. If after fully digesting today's news the market decides to continue its rally into tomorrow, we could even reach the top of this bearish channel. However, the RSI on this chart seems to have topped out and the MACD seems ready for a reversal.
Basic technicals seem to point downward from here. If we break out of the bottom of this channel, as outlined in the chart, it could spell gloomy days for the market overall. This resonates with the nervous "big crash" bears, I'm sure. But what do you think? Are we to continue the rally this week, or bounce off of this triple top?
Surely going to Fly after FED rate HikeLooking Bullish on H1,Many economic indicators pointing to slowing economic conditions and everyone’s convinced the #FED is the #inflation slayer ready to hike overnight rates to 3%…while they may raise 25-50bps to save face they may also reverse course by the next meeting, caveat emptor
Bitcoin Price Projections Based on Fed Rate IncreasesTraders,
We all know that the USD is still the global reserve currency. And who governs the strength or weakness of the dollar? Yours truly, JPOW and co. Crypto currency prices are absolutely without question tied to the broader markets and the U.S. dollar. Therefore, we MUST consider how our crypto lead dawg will respond to JPOW's rate decision. With that said, here's what I see in the cards for ole' BTC. Let's start with the worst-case scenario:
JPOW rug pulls the market with an enormous 75 pt hike or more - we drop below our strong and very critical 37550 support, somewhere in the purple
JPOW does the expected 50 point hike & either speaks to another 50 pts hike soon or insinuates such action - we remain below our multi-year resistance level and move sideways-ish, somewhere in the red
JPOW does the expected 50 point hike & either speaks to another 25 pt hike soon or insinuates softer action going forward - we either remain red or it is possible we go yellow again
JPOW only bumps it 25! - Rocket fuel! It's moon time again! Green area. 🚀🚀🚀
Watch closely, everything (and I mean EVERYTHING) hinges upon the FED today!
Press release 2:30 EST (I believe).
Best to you all,
-Stewdam.us
Prediction of 4 Scenarios from Fed's decision on BTC From what I've managed to gather, 7 out of 9 governors vote for a +50bp hike; 8 out of 9 are in favor of reducing B/S.
If the news to be released in 3.5 hours comes out with reducing balance sheet, which is likely to take effect in June, then highly likely we’ll see a black swan.
+50bp is within expectation, but it’s still negative to the market. We can expect a pull back in 1-3 days but it’s not strong enough to reverse as liquidity is under the pressure of flowing out…
Welcome your comment and ideas.
Viva la Bitcoin.
Safe trading, frens.
EURAUD Hot AnalysisThere are many Factors that indicates we can have uptrend from here . Let's see what will be occure
India VIXWith FOMC outcome due tonight, volatility is increasing sharply (pre-event uncertainty)
We are in the dark as to what FED will do tonight - so many possibilities, add to that statement - hawkish or dovish
25 bps market will rally
50 bps appears discounted
75 bps market will panic
Hence better to stay light
Above 21.75 the crucial resistance is at 2.80 if that breaches then be prepared for extreme moves (we have just seen the trailer in that case) all the way till 28
This would be mean large intra-day candles & gap openings. Avoid writing PE during such time unless well hedged. Also reduce derivative exposure its not worth it during such times.
Post event wait for VIX to start cooling down, trend direction will become clear by then
DOLLAR INDEX (DXY)DXY EDGES HIGHER after breakout. The Federal Reserve begins a two-day meeting which is expected to end in half-point rise in U.S. interest rates.
EURUSD Outlook for May 2022...My analysis for EURUSD on the monthly timeframe. Includes some simple fundamental perspective but if you want to discuss fundamentals in depth feel free to comment below. Aside from that, there's not much the dollar can do to beat anticipations unless liquidity of the dollar really tightens. In that scenario, the dollar will really strengthen and we could see parity, but I don't think the Fed will tolerate that or even risk the possibility. It's more of a possibility that something breaks in the U.S. economy, which is the case when every recession has happened in the U.S., so it would be sudden. Aside from that the Euro is moving well economically too, maybe a little less enthusiasm towards it than the dollar and more of a risk to it's bullish scenario comes from Russia, energy and slowdown in the EU as a result of sanctions and high prices.
Either way, technicals on the lower timeframes to follow...
The Euro Is Heading for Parity Against the DollarThe US dollar and the euro are the world’s reserve currencies. Political and economic stability and free convertibility are the requirements for reserve currency status. Central banks and governments worldwide gold the US and European currencies as reserve assets.
The exchange rate between the US dollar and the euro is multifactorial. Interest rate differentials, political trends, and other issues determine the value of each foreign exchange instrument versus the other. The euro has been around since January 1, 1999, and euro notes and coins were only available two decades ago, in 2002. The euro currency opened for trading in the futures market in April 2001 at an exchange rate of $0.8760 versus the US dollar.
The euro first rose above parity with the US currency in July 2002. The last time it was below was in December 2002, but the recent exchange rate price action and the factors determining currency values could send the euro back to levels not seen in two decades.
New highs in the dollar index- Approaching the test of the 2020 high
The US dollar index has a 57.6% exposure to the euro currency. Since January 2021, the dollar index has been on a bullish path, making higher lows and higher highs.
As the chart highlights, the dollar index futures contract moved from a low of 89.165 in early January 2021 to the most recent high of 103.950 on April 28, 2022, a 16.6% rise. The index is approaching a critical technical resistance level.
The long-term chart shows the upside target stands at the March 2020 103.960 high, the highest level for the index since 2022. A break above that level will make the next upside target the July 2001 121.290 high. A move towards that level would push the euro below parity against the US dollar for the first time in two decades.
Lower lows in the euro versus the US dollar foreign exchange relationship
A bearish trend in the euro versus the US dollar currency relationship is nothing new.
The chart shows the euro reached an all-time high against the dollar in July 2008 at $1.6038. Since then, it has been all downhill for the European currency. The euro reached a low of $1.03405 in January 2017. After a recovery took the euro to above the $1.25 level in February 2018, the downtrend resumed, and it was approaching the early 2017 low on April 29 at below the $1.075272 level. A move below the $1.03405 level makes the target the critical psychological parity level.
Herding cats- The European economic challenge
The European Union is a collection of countries with diverse cultures. Moreover, economic policy is a blend of different orientations to monetary and fiscal policies.
Southern Europe has depended on tourism and has had a far looser approach to economic management than the austerity of the north. The north has been the industrial powerhouse, providing financial stability for the Union.
Greece, Italy, Spain, and Portugal are far different economies than Germany, France, the Netherlands, and Belgium. Policy agreement between the Union members has been like herding feral cats over the past two decades. The north has bailed out the south routinely, causing stress on relationships within the Union and pressure on the euro currency.
Cultural differences have been the borders since the establishment of the European Union and continue to be a factor that impacts the euro’s value.
War on the border- An aggressive Russia is bad news for the euro
In early 2022, the European Union is facing its most challenging test since its birth. Russia’s invasion of Ukraine launched the first major war in Europe since WW II. Russian aggression is a challenge to NATO countries, particularly those bordering the former Soviet Empire. Over the coming years, European military budgets will need to dramatically increase to provide safety and deterrence against the Russian aggressor. As military spending rises, it is likely to pressure the euro currency as the Union faces new threats that transcend the costs of the cultural divide between the northern and southern countries. The threat will likely unify the north and south, but the price tag for unification will be staggering.
Rising US rates are another nail in the euro’s coffin- Parity is only the first stop – The trend is your friend
In currencies, exchange rates are highly sensitive to interest rate differentials. The US dollar and euro are the world’s reserve currencies. The US central bank has shifted its monetary policy path to a more hawkish approach with inflation. raging.
The March consumer and producer price indices rose by 8.5% and 11.2%, respectively. The US Fed ended its quantitative easing in March 2022 and will quickly shift to quantitative tightening, allowing debt securities to roll off its swollen balance sheet at maturities. The FOMC will increase the short-term Fed Funds rate by at least 50 basis points at this week’s May 4 meeting. US short-term interest rates are going nowhere but higher.
Meanwhile, the US 30-Year Treasury bond futures have been a falling knife, pushing interest rates higher further out along the yield curve.
The chart shows the decline in the long bond futures since the March 2020 high. The most recent 138-14 low on April 20, 2021, took the bellwether government bond futures to the lowest level since November 2018. Critical technical support stands at the October 2018 136-16 low. Below there, the next target is the 2013 127-23 low.
A falling bond market and higher interest rates make the dollar more attractive than the euro. Europe cannot afford to increase interest rates and keep pace with the US dollar interest hikes because of its economic and geopolitical landscapes. Therefore, the dollar’s bullish trend will likely continue over the coming weeks and months.
Bull and bear markets rarely move in straight lines. Currency markets tend to experience far lower volatility than stocks, bonds, commodities, and other asset classes as governments manage price moves with intervention to provide stability. However, technical and fundamental factors support the path to parity for the dollar and euro currencies. In 2000, the euro reached $0.8901 against the dollar, the long-term technical target.
A stronger dollar and weak euro will have significant ramifications for markets across all asset classes, but the currency markets are a mirage as they trade in a vacuum. A trip to the supermarket, gas pump, or purchasing any goods or services in dollars reveals that the US currency has lost substantial purchasing power over the past year. The dollar may be strong against the euro, and it looks set to continue the current path, but all fiat currencies are losing power. As one strategist said the dollar is “the cleanest shirt in the dirty laundry.”
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Potential Bearish Flag in Homebuilder ETFHomebuilders are among the worst-performing groups this year as interest rates increase. Now there could be a bearish continuation pattern in the iShares U.S. Home Construction ETF .
ITB sank to a 52-week low around $57 one month ago, followed by a period of consolidation. The lows have inched higher during this time, creating a potential bearish flag.
Second, notice the lower highs starting on April 21. These occurred near a falling trendline along the highs of January and March.
Third, the eight-day exponential moving average (EMA) has remained below the 21-day EMA. That suggests the intermediate-term downtrend remains in effect.
Finally, ITB has yet to reach potentially important support. The main level buyers may target could be closer to $51.50, the lows in September and October of 2020.
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Bitcoin Pivotal Week AheadBTC has followed a descending parallel channel since Nov 2021 ATH shedding >52% in late Jan to.$32.9k. Since the low, BTC rallied to a local high of $48k in late March before resuming the gradual mark-down. Currently sitting >40% from ATH @ $38.8k.
Bitcoin Weekly Chart currently above 100 EMA while the 20 EMA has crossed below the 50.
Previous FOMC in early March following 25 bps hike, the market rallies in the face of a "hawkish sounding" Federal Reserve... casting doubt on the seriousness of reining in rampant inflation that's achieved highest levels in >40 years w/ no sign of slowing.
Critical juncture in price action, as BTC will likely put in a red daily candle Monday 5/2 and look for direction from the broader markets over May 3rd & 4th.
Potential for market upswing following the Fed's decisions is possible and would fall in line with March market response to Fed's seemingly hollow words.
The more like scenario is market realization that inflation is problematic and Fed's efforts to reduce central bank balance sheets via quantitative tightening has teeth and will continue the gradual market corrections we've seen in Q1.
Macro factors are indicating headwinds continue as GDP in Q1 was down, labor remains incredibly tight, prices remain unsustainably high.
Bitcoin likely to creep down to $35k range as the market considers Fed actions and decides on a direction.
US 10Y Yield Nearing 3%I believe that watching the US10Y is a great way to gauge what's happening in the equity markets. As we've been witnessing, stock valuations are being compressed and investors are feeling the pain. I've been watching this chart for a while, and you can see that the 10-year Treasury yield is nearly at 3% and is at 4-year highs. This is something to definitely keep an eye on as we continue to see a hawkish fed. We could see a change in dynamic within the secular trend of the market if this scenario continues in this trajectory.
Backtesting the FOMC meetings: are the rate hikes priced in?I’m going to profit off of the fact that next Tuesday (May 3rd) the Federal Open Market Committee (FOMC) main meeting will take place to backtest how this event affects the markets (focusing on Bitcoin but in the end all the markets are connected). Firstly, I’m going to talk about what I expect Jerome Powell to say in the upcoming meeting, and then I’ll explain how they affect price. Lastly, I’ll estimate some technical targets.
Meeting expectations
So briefly, the results of the last CPI were 7.5% year over year (YoY) inflation, not above nor below the expectations. The jobs report that came out on March 31st showed signs of rising wages and a decrease in unemployment. As these events are already priced in as they happened weeks ago, the approach I want to take on this data is that the Fed wants to keep their position, not too dovish but not too hawkish, as the expectations are being met.
The thing that the Fed has looked more at is the current conflict in Ukraine, which affected supply chains but, surprisingly, didn’t reduce consumer demand. And this means that they will have to start being more aggressive on the next rate hikes, announcing 50 basis points (bps) in the next two meetings.
Regarding this unpredictable situation, if they keep the same position (which I see likely), they would want to return to 25 bps hikes as soon as they can.
The market reaction
With all that said, the Fed is likely to maintain their ideas, so I’ll dive into the backtesting part of the article. If we take the distance between every meeting since January 2021 and the next swing high/low (in percentages), and do an average excluding the outliers, we get around 8% move to the upside after every meeting. Note that this is usually driven by momentum, and the market reaction in the long-term may be totally different (as we see in November and December).
However, the Fed has changed (and thus the market reactions) since they said inflation is no ‘longer’ transitory. The odds of a recession started to get higher and the fear kicked in. Then, in January, I think the price reacted positively as the Federal Reserve showed that they might not turn hawkish. And the same happened in the last meeting, when everyone feared the consequences of the war.
Nothing can change now: we have a catalyst (the Fed announcing they’re going to hike 50 bps instead of 25), markets have trended down before the meeting and technical analysis, though especially on-chain analysis are still showing bullish signs.
Targets based on technical analysis
Before anything, I’m still confident we have to take the liquidity below $37k, which I expect to see at the start of the week, before the FOMC. Usually liquidity taking action implies that there is going to be a bounce just after the price is reached, so this makes percent sense if we add the volatility that there should be during the meeting.
In the next few days after it, I’d expect at least the high Bitcoin has set a few days ago at $40.4k to be taken, which is a 10% upside from $37k (close to the average move since 2021). If we end up going higher I’d expect the fair value gap (or FVG) at $45k to fill, which would represent a 22% move (similar to the last two meetings).
Lastly, I’d expect the SPY to move similarly and try to consolidate somewhere around $440 as most earnings haven’t been bad, with the only big exception being Amazon.
S&P 500 Daily Chart Analysis For April 29, 2022 Technical Analysis and Outlook
The current downtrend is expected to continue to Major Mean Sup 4070 and Next Outer Index Dip 3990. Interim bullish moves are possible within the current downtrend - such as Mean Res 4296.
Euro rebounds on strong GDP, inflation dataThe euro has bounced back on Friday with strong gains, ending a nasty 6-day losing streak. In the European session, EUR/USD is trading at 1.0565, up 0.64% on the day.
It has been a rough road for the euro, which hit a 5-year low this week as it broke below the 1.05 line. We're seeing a correction today, primarily due to solid GDP data out of Germany and the Eurozone. German GDP rose 4.0% in Q1 YoY, above the estimate of 3.8% and well ahead of the 1.8% gain in the Q4 of 2020. Eurozone GDP rose to 5.0% on an annualized basis, matching the forecast and above the prior release of 4.7%. The euro also received a boost as Eurozone CPI is expected to hit 7.5% YoY in April, up from 7.4%.
Despite today's positive data, there are dark clouds on the horizon, which will more than likely send the euro back to its losing ways. France and Italy, the largest economies after Germany in the eurozone, both recorded negative growth of -0.2% QoQ in Q1, while Germany eked out a 0.2% gain. This points to the heavy toll that the Ukraine war has taken on the eurozone economies, and the war could certainly intensify, with Russia making a push in the eastern and southern parts of Ukraine.
There is also uncertainty surrounding the sanctions against Russia. On the one hand, there is talk of the EU banning oil imports from Russia, which would badly hurt the Russian economy but also dampen growth in Western Europe. At the same time, there are reports that some major European energy companies have accepted Moscow's demands to pay for gas and oil in roubles. This could lead to a collision between the companies and European governments, which could turn into another headwind for the struggling euro.
As if the euro doesn't have enough on its plate, the hawkish pivot by the Fed has widened the US/Europe rate differential and sent the euro tumbling in recent weeks. With the Fed poised to raise rates by 0.50% next week and further super-size rate hikes on the table, the euro appears on track to drop to 1.03, and parity has become a realistic possibility.
1.0553 is a weak support line. Below, there is support at 1.0411
There is resistance at 1.0657 and 1.0728
Graph Protocol Relief RallyNear-term long positions are attractive, with reassessment necessary as inflation reporting in April approaches. Bullish continuation will be more risky in the days leading up to CPI/PPI reporting.
Following Bitcoin and the broader markets, GRT will realize near-term bullish support as the markets have shrugged of the Fed's 25 bps rate hike.
GRT will flip 20 EMA into support, then push through 100 EMA... ultimately testing 200 EMA until next round of economic reporting.
Sharply rising prices are elected to continue as there's been no substantive change to monetary policy, QE continues, corporations continue elevated pace of stock buybacks.
Inflation results for March (CPI & PPI) will be published by BLS on 4/12 & 4/13 with high likelihood of further increases from the lagging reporting.
April reports will be a pivotal as the FOMC will not meet until early May with the April inflation results published a week after the Fed meeting.
Current expectation is shockingly higher inflation with the Fed's hand being forced, either accept persistent inflation and risk a wage-price spiral or adjust approach with more hawkish action and less reliance on hollow words.
Maintaining status quo until midterm elections is likely to become untenable, recession risk is increasing.
NZ dollar drops to 22 month-lowThe misery continues for the New Zealand dollar, which is down almost 1% on Thursday. NZD/USD has fallen below the 0.65 level and has plunged 6.54% in the month of April.
ANZ Business Confidence was unchanged in April, with a reading of -42.0. That means close to half of New Zealand businesses are pessimistic about the economic outlook over the next 12 months. The problems identified by businesses are nothing new, with shortages in materials and workers and inflation driving up costs. New Zealand inflation hit 6.9% in Q1, a 30-year high. In addition to the surge in inflation, businesses expect inflation to continue to rise - in April, inflation expectations rose to 5.9%, up from 5.5% in March.
The upside risk in inflation expectations is a paramount concern for the RBNZ, which faces a massive battle in wrestling inflation to lower levels. Today's weak Business Confidence report will exacerbate those worries and will support aggressive rate tightening from the RBNZ in order to get a handle on spiralling inflation. A back-to-back hike of 0.50% at the May meeting is a strong possibility.
Even with the RBNZ in aggressive mode, the US dollar continues to pummel its New Zealand counterpart. The Federal Reserve is poised to deliver another half-point hike at next week's meeting and has hinted at more oversize rate hikes in order to curb high inflation. US Treasury yields are moving higher, which is supporting the US dollar rally. Yields rose on Thursday, even though US GDP surprised with a contraction in Q1, the first negative growth recorded since the pandemic recession in 2020.
NZD/USD has broken below the 0.6504 line. Next, there is support at 0.6381
There is resistance at 0.6569 and 0.6692
