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NZD-CHF

NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. The Monetary Policy outlook for the RBNZ At their Oct meeting, the RBNZ delivered on expectations to raise the OCR to 0.50%. As the hike was already fully priced, the lack of new hawkish tones we saw a textbook buy-the-rumour-sell-the-fact reaction in the NZD pushing lower. There was additional focus on the RBNZ expecting headline CPI to climb above 4 percent in the near term, but the most important part of the statement was the subsequent comment that the bank still sees CPI returning towards the 2 percent midpoint over the medium term and that ‘the current COVID-19-related restrictions have not materially changed the medium-term outlook for inflation and employment since the August Statement’. Thus, despite recent covid concerns, inflation concerns and energy concerns, that part of the statement acknowledged that nothing has changed in terms of the bank’s OCR projections released at the August meeting. Unsurprisingly, the bank also stated that their future rate path is contingent on the medium-term outlook for inflation and employment, which means keeping close tabs on incoming data and the virus situation will remain a key focus for us in the weeks and months ahead. With the bank now being the first to hike rates among the major central banks and sitting on the highest cash rate among the majors, and with an OCR projection that is still head and shoulders above the rest, the bias for the NZD remains firmly titled to the upside, and as rates keeps rising, the currency’s carry attractiveness will be a key focus point for the NZD in the months ahead. 2. Developments surrounding the global risk outlook. As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term , but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver. 3. Economic and health developments Friday’s price action was once again a good example what an impact rising virus cases can still have on sentiment. The NZD was an underperformer on Friday as virus cases reached new record highs. If cases continue to climb, it will most likely lead to more restrictive measures, which could dent the market’s rate expectations from the RBNZ, so one to watch closely in the sessions to come. 4. CFTC Analysis Latest CFTC data showed a positioning change of -2308 with a net non-commercial position of +6440. The NZD reflects net-long positioning for both large speculators as well as leveraged funds but are nowhere near stress levels right now. With the NZD now sitting on the highest cash rate among the major economies and with expectations of that to continue to rise we think carry attractiveness will become a key focus point for the NZD in the months ahead and should mean a favourable upside bias for the NZD against the low yielders like JPY and CHF. In the short- term though, as we mentioned above, the virus situation could see some of the recent upside given back. CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF with Swiss economic data or SNB policy meetings rarely being very market moving. Although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall dovish disposition and preference for being behind the ECB in terms of policy decisions. The market's overall risk tone improved considerably after the pandemic as a result of the global vaccine roll out and the unprecedented amount of monetary policy accommodation and fiscal support from governments. The Delta variant and subsequent impact on growth expectations is of course a sobering reminder that risks remain. Thus, there is still a degree of uncertainty and risks to the overall risk outlook remains which could prove supportive for the safe havens like the CHF should negative factors for the global economy develop. However, on balance the overall risk outlook is still positive in the med-term and barring any major meltdowns in risk assets the bias for the CHF remains bearish in the med-term. 2. Idiosyncratic drivers for the CHF Despite the negative drivers, the CHF saw some surprisingly strength from June. This divergence from the fundamental outlook didn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests. Recent research from the team has revealed an interesting correlation between the CHF and simultaneous price action in both Gold and the USD which could explain some of the recent price action. We also need to be careful of the possibility of SNB FX intervention. Apart from that, ING investment bank has recently argued that recent CHF strength could be due to the lower inflation in Switzerland compared to the EU which meant that the real trade-weighted CHF has been trading too cheap. They also expanded that the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful FX intervention lately. The bottom line is that there are often plenty of idiosyncratic drivers which might or might not impact the CHF and makes short-term price fluctuations a mixed bag for the most part. 3. CFTC Analysis Latest CFTC data showed a positioning change of -4612 with a net non-commercial position of -17584. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF is back inside net-short territory as one would expect from a currency with an overall med-term bearish outlook. Even though we expect the currency to continue weakening in the med-term, any drastic escalation in risk off tones could continue to provide support for the safe-haven currency in the short-term and is always something to keep in mind. With the EURCHF pair treading water around the 1.07 level, UBS believes the pair is already in intervention territory for the SNB and also thinks fading any further downside in the pair as opportunities to lean into longs.
by thunderpips
10
NZDCHF potential for drop! | 21th Oct 2021Price have recently been on a bullish momentum. We see potential entry at 0.66308 in line 127.2% Fibonacci extension and 78.6% Fibonacci retracement for a pullback towards 0.65816 in line with 23.6% Fibonacci retracement. Stochastics are at a level where pullbacks previously occured. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Short
by Rockqet
Wait for a buying opportunity to appear with NZDCHFH4 time frame. Structure: Descending channel. After down to the 50-61.8 Fibonacci zone of the previous strong up move, divergence signals are now appearing. It is likely that from this price zone will appear reversal patterns. Wait for a buying opportunity when the price completes the reversal pattern or breaks the descending channel and has a confirmed by retest. Profit target is 0.66000 zone. ----------------------------------------------------------------------------------------------- Wish you all have a good trading day!
Long
by tradafx
NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. The Monetary Policy outlook for the RBNZ At their October meeting, the RBNZ delivered on market expectations and raised the OCR by 25-basis points to an OCR of 0.50%. As the 25- basis point hike was already fully priced in, the fact that the bank did not provide any new additional information saw a textbook buy-therumour-sell-the-fact price reaction with the NZD pushing lower. As has recently been the case with most central bank commentary, there was additional focus on the RBNZ expecting that headline CPI inflation to increase above 4 percent in the near term, but the most important part of that part of the statement was the subsequent comment that the bank still sees CPI returning towards the 2 percent midpoint over the medium term. Furthermore, the most important take away from the RBNZ statement for us was that ‘the current COVID-19-related restrictions have not materially changed the medium-term outlook for inflation and employment since the August Statement’. Thus, despite recent covid concerns, inflation concerns and energy concerns, that part of the statement acknowledged that nothing has changed in terms of the bank’s OCR projections released at the August meeting. Unsurprisingly, the bank also stated that their future rate path is contingent on the mediumterm outlook for inflation and employment, which means keeping close tabs on incoming data and the virus situation will remain a key focus for us in the weeks and months ahead. With the bank now being the first to hike rates among the major central banks and sitting on the highest cash rate among the majors, and with an OCR projection that is still head and shoulders above the rest, the bias for the NZD remains firmly titled to the upside as the bank remains the most hawkish among the major central banks. As interest rates keeps rising, we think the currency’s carry attractiveness will be a key focus point for the NZD in the months ahead. 2. Developments surrounding the global risk outlook. As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term , but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver. 3. The country’s economic and health developments So far, the virus situation in New Zealand has been a flash in the pan worry. The government has been able to trace the source of the recent outbreak and should be able to keep the situation under control. Any further escalation though will be important to watch. 4. CFTC Analysis Latest CFTC data showed a positioning change of -2190 with a net non-commercial position of +8052. The flush lower in the NZD after the RBNZ was in line with our expectations as the bar for a hawkish surprise was quite high going into the meeting. However, after the buy-the-rumour- sell-the-fact reaction and subsequent flush lower, the NZD is back at some very attractive med-term levels, especially versus the low-yielding currencies like the JPY and the CHF, thus we like the odds of looking for med-term allocations to the upside in the NZDJPY and NZDCHF . CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF with Swiss economic data or SNB policy meetings rarely being very market moving. Although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall dovish disposition and preference for being behind the ECB in terms of policy decisions. The market's overall risk tone improved considerably after the pandemic as a result of the global vaccine roll out and the unprecedented amount of monetary policy accommodation and fiscal support from governments. The Delta variant and subsequent impact on growth expectations is of course a sobering reminder that risks remain. Thus, there is still a degree of uncertainty and risks to the overall risk outlook remains which could prove supportive for the safe havens like the CHF should negative factors for the global economy develop. However, on balance the overall risk outlook is still positive in the med-term and barring any major meltdowns in risk assets the bias for the CHF remains bearish in the med-term. 2. Idiosyncratic drivers for the CHF Despite the negative drivers, the CHF saw some surprisingly strength from June. This divergence from the fundamental outlook didn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests. Recent research from the team has revealed an interesting correlation between the CHF and simultaneous price action in both Gold and the USD which could explain some of the recent price action. We also need to be careful of the possibility of SNB FX intervention. Apart from that, ING investment bank has recently argued that recent CHF strength could be due to the lower inflation in Switzerland compared to the EU which meant that the real trade-weighted CHF has been trading too cheap. They also expanded that the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful FX intervention lately. The bottom line is that there are often plenty of idiosyncratic drivers which might or might not impact the CHF and makes short-term price fluctuations a mixed bag for the most part. 3. CFTC Analysis Latest CFTC data showed a positioning change of -4092 with a net non-commercial position of -15679. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF is back inside net-short territory as one would expect from a currency with an overall med-term bearish outlook. Even though we expect the currency to continue weakening in the med-term, any drastic escalation in risk off tones could continue to provide support for the safe-haven currency in the short-term and is always something to keep in mind.
by thunderpips
Wait for the opportunity to sell with NZDCHFH2 time frame. Structure: Downtrend. The price formed a retracement wave and retested the 0.64500 resistance. After forming a new high, the price immediately down sharply with the upward momentum also weakening. Waiting for a candlestick pattern to appear, NZDCHF can be sold. The profit target is the 0.63600 zone. ----------------------------------------------------------------------------------------------- Wish you all have a good trading day!
Short
by tradafx
NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. The Monetary Policy outlook for the RBNZ New Zealand’s Zero Covid strategy caused quite the rigmarole for the NZD before the RBNZ’s last meeting as market participants were forced to unwind aggressive expectations for rate hikes going into the meeting. The unwind was so aggressive that OIS prices dropped from a 100% chance of a hike at that meeting to just above 50% going into it. The RBNZ surprised by leaving rates unchanged, but offered an optimistic ton compared to their prior meetings. They projected 7 hikes between Q4 2021 and H1 2023 (bringing the OCR to 2.0%). This was much more aggressive than what markets were expecting. Governor Orr later explained that they cannot wait for uncertainty to move on policy as they have a lot of work to do to get back to the neutral rate of 2.0%. When asked about Oct, the Governor said the meeting is live. Thus, with the upgraded rate path the med-term bullish outlook remains intact for the NZD. A week after their meeting we also had very hawkish comments from RBNZ’s Hawkesby who stated that the bank’s decision not to hike rates was mostly about optics and not due to risks, and also explained that the bank contemplated hiking rates by 50 basis points. This just confirmed the bank’s hawkish pivot and places them miles ahead any other major central banks. The announcement two weeks ago about the RBNZ moving forward with tightening LVR restrictions to curb speculation in the housing market was interesting from a timing point of view. Usually, these type of macroprudential policies takes pressure of the central bank to reign in speculation with higher rates. The announcement has already seen some repricing for October with markets now pricing in a 25-basis point hike instead of a 50-basis point hike for this week’s upcoming meeting on Wednesday. 2. Developments surrounding the global risk outlook. As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the AUD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the AUD in the med-term , but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver. 3. The country’s economic and health developments So far, the virus situation in New Zealand has been a flash in the pan worry. The government has been able to trace the source of the recent outbreak and should be able to keep the situation under control. Any further escalation though will be important to watch. 4. CFTC Analysis Latest CFTC data showed a positioning change of +2144 with a net non-commercial position of +10246. This week saw some decent unwind in net-long positions for leveraged funds (fast money) which can also explain some of the oversized downside in the NZD during the past week. With the overall optimistic rate path from the RBNZ, the bias for the currency remains unchanged, and with small net-long positioning the current spot levels for the NZD still looks attractive for med-term buyers but waiting for the RBNZ is a prudent move. CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF with Swiss economic data or SNB policy meetings rarely being very market moving. Although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall dovish disposition and preference for being behind the ECB in terms of policy decisions. The market's overall risk tone improved considerably after the pandemic as a result of the global vaccine roll out and the unprecedented amount of monetary policy accommodation and fiscal support from governments. The Delta variant and subsequent impact on growth expectations is of course a sobering reminder that risks remain. Thus, there is still a degree of uncertainty and risks to the overall risk outlook remains which could prove supportive for the safe havens like the CHF should negative factors for the global economy develop. However, on balance the overall risk outlook is still positive in the med-term and barring any major meltdowns in risk assets the bias for the CHF remains bearish in the med-term . 2. Idiosyncratic drivers for the CHF Despite the negative drivers, the CHF saw some surprisingly strength from June. This divergence from the fundamental outlook didn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests. Recent research from the team has revealed an interesting correlation between the CHF and simultaneous price action in both Gold and the USD which could explain some of the recent price action. We also need to be careful of the possibility of SNB FX intervention. Apart from that, ING investment bank has recently argued that recent CHF strength could be due to the lower inflation in Switzerland compared to the EU which meant that the real trade-weighted CHF has been trading too cheap. They also expanded that the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful FX intervention lately. The bottom line is that there are often plenty of idiosyncratic drivers which might or might not impact the CHF and makes short-term price fluctuations a mixed bag for the most part. 3. CFTC Analysis Latest CFTC data showed a positioning change of -2370 with a net non-commercial position of -11587. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF is back inside net-short territory as one would expect from a currency with an overall med-term bearish outlook. Even though we expect the currency to continue weakening in the med-term , any drastic escalation in risk off tones could continue to provide support for the safe-haven currency in the short-term.
by thunderpips
7
NZD/CHF:UPTREND | FUNDAMENTAL+TECHNICAL ANALYSIS | LONG 🔔The Swiss government has announced that it has signed a contract with Johnson & Johnson for 150,000 doses of the Covid-19 vaccine. Delivery of the doses is expected next week. Welcome back Traders, Investors, and Community! Check the Links on BIO and If you LIKE this analysis, Please support our Idea by hitting the LIKE 👍 button Traders, if you like this idea or have your own opinion about it, please write your own in the comment box . We will be glad for this. Feel free to request any pair/instrument analysis or ask any questions in the comment section below. Have a Good Day Trading !
Long
by FOREXN1
1
Opportunity to sell with NZDCHFH1 time frame. Structure: Downtrend. After a strong move down to create a new bottom forming a downtrend, the price of NZDCHF is showing signs of retesting the previous support at 0.64500. Wait for another retest to this price, then you can look for selling opportunities. The profit target is the 0.63700 and 0.62400 zones. ----------------------------------------------------------------------------------------------- Wish you all have a good trading day!
Short
by tradafx
NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. The Monetary Policy outlook for the RBNZ New Zealand’s Zero Covid strategy caused quite the rigmarole for the NZD this week as market participants were forced to unwind some of their very aggressive expectations for rate hikes going into the meeting. The unwind was so aggressive that OIS prices dropped from a 100% chance of a hike to just above 50% at some stage. The RBNZ chose to leave rates unchanged, but despite the virus escalation they offered a much more optimistic tone compared to their prior meeting by updating their rate path projections to show 7 projected hikes between Dec 2021 and H1 2023 (bringing the OCR to 2.0%). This was even more aggressive than the already aggressive bets heading into the meeting before the covid news hit the wires. The Governor also later explained that they need to continue to move on policy and cannot wait for uncertainty as they have a lot of work to do to get back to the neutral rate of 2.0%. Also, when asked about Oct Governor Orr said the meeting is live, but also acknowledged that they’ve made it very clear their next move is likely a hike so they can afford to wait. Thus, with the upgraded rate path the med-term bullish outlook remains intact for the NZD. Last week we saw very hawkish comments from RBNZ’s Hawkesby who stated that the bank’s decision not to hike rates last week was mostly to do with optics and not due to perceived risks, and also explained that the bank contemplated hiking rates by 50 basis points, confirming the bank’s hawkish tone and placing the RBNZ once again miles ahead of any other major central banks in terms of policy normalization and tightening. This week’s announcement about the bank moving forward with proposed tightening of LVR restrictions to curb speculation in the housing market. Usually, these type of macroprudential policies takes pressure of the central bank to reign in speculation with higher rates. The change has already seen some repricing of an October hike so pay attention to any further push back in hike expectations for October. 2. Developments surrounding the global risk outlook. As a high-beta currency, the NZD benefited from the market's improving risk outlook coming out of the pandemic as participants moved out of safe-havens. As a pro-cyclical currency, the AUD enjoyed upside alongside other cyclical assets supported by reflation and post-recession recovery best. If expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the AUD in the med-term , but recent short-term jitters are a timely reminder that risk sentiment is also a very important short-term driver. 3. The country’s economic and health developments So far, the virus situation in New Zealand has been a flash in the pan worry. The government has been able to trace the source of the recent outbreak and should be able to keep the situation under control. Any further escalation though will be important to watch. 4. CFTC Analysis Latest CFTC data showed a positioning change of +1896 with a net non-commercial position of +8102. With the overall optimistic rate path from the RBNZ, the bias for the currency remains unchanged, and with a small net-long positioning the current spot levels for the NZD still looks attractive for med-term buyers, especially after the push lower with recent risk off sentiment. CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF with Swiss economic data or SNB policy meetings rarely being very market moving. Although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall dovish disposition and preference for being behind the ECB in terms of policy decisions. The market's overall risk tone improved considerably after the pandemic as a result of the global vaccine roll out and the unprecedented amount of monetary policy accommodation and fiscal support from governments. The Delta variant and subsequent impact on growth expectations is of course a sobering reminder that risks remain. Thus, there is still a degree of uncertainty and risks to the overall risk outlook remains which could prove supportive for the safe havens like the CHF should negative factors for the global economy develop. However, on balance the overall risk outlook is still positive in the med-term and barring any major meltdowns in risk assets the bias for the CHF remains bearish in the med-term . 2. Idiosyncratic drivers for the CHF Despite the negative drivers, the CHF saw some surprisingly strength from June. This divergence from the fundamental outlook didn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests. Recent research from the team has revealed an interesting correlation between the CHF and simultaneous price action in both Gold and the USD which could explain some of the recent price action. We also need to be careful of the possibility of SNB FX intervention. Apart from that, ING investment bank has recently argued that recent CHF strength could be due to the lower inflation in Switzerland compared to the EU which meant that the real trade-weighted CHF has been trading too cheap. They also expanded that the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful FX intervention lately. The bottom line is that there are often plenty of idiosyncratic drivers which might or might not impact the CHF and makes short-term price fluctuations a mixed bag for the most part. 3. CFTC Analysis Latest CFTC data showed a positioning change of -3339 with a net non-commercial position of -9217. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF is back inside net-short territory as one would expect from a currency with an overall med-term bearish outlook. Even though we expect the currency to continue weakening in the med-term , any drastic escalation in risk off tones could continue to provide support for the safe-haven currency in the short-term.
by thunderpips
Wait for a sell signal with NZDCHFH1 time frame. Structure: The bullish structure is broken. Price breaks Key level at 0.65000. Currently, the price is forming a small accumulation area retest Key level has just been broken. If the price breaks out of this consolidation area, confirming the downtrend, selling with targets at 0.63500 and 0.62600 is possible. ----------------------------------------------------------------------------------------------- Wish you all have a good trading day!
Short
by tradafx
Channel breakout in NZDCHFHello, my fellow traders hope you all are making some profits. We are here with our new analysis so that we can increase those profits for you. Let’s get into it. As we can see, the price is inside DESCENDING CHANNEL and also gave a BREAKOUT. Let us know your views on this in the comment section. Thank you all. There is good news for our followers. We will be analyzing on-demand. So let us know which pair you want our analysis on, and we will get it for you. Do like and follow us
by Ryan_lopes
NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. Developments surrounding the global risk outlook. As a high-beta currency, NZD has benefited from the market's improving risk outlook over recent months as participants moved out of safehavens and into riskier, higher-yielding assets. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets going into what majority of market participants think was an early post-recession recovery phase. As long as expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term , but the recent short-term jitters and risk off flows once again showed us why risk sentiment is also a very important short-term driver for the currency. 2. The Monetary Policy outlook for the RBNZ New Zealand’s Zero Covid strategy caused quite the rigmarole for the NZD this week as market participants were forced to unwind some of their very aggressive expectations for rate hikes going into the meeting. The unwind was so aggressive that OIS prices dropped from a 100% chance of a hike to just above 50% at some stage. The RBNZ chose to leave rates unchanged, but despite the virus escalation they offered a much more optimistic tone compared to their prior meeting by updating their rate path projections to show 7 projected hikes between Dec 2021 and H1 2023 (bringing the OCR to 2.0%). This was even more aggressive than the already aggressive bets heading into the meeting before the covid news hit the wires. The Governor also later explained that they need to continue to move on policy and cannot wait for uncertainty as they have a lot of work to do to get back to the neutral rate of 2.0%. Also, when asked about Oct Governor Orr said the meeting is live, but also acknowledged that they’ve made it very clear their next move is likely a hike so they can afford to wait. Thus, with the upgraded rate path the med-term bullish outlook remains intact for the NZD. Last week we saw very hawkish comments from RBNZ’s Hawkesby who stated that the bank’s decision not to hike rates last week was mostly to do with optics and not due to perceived risks, and also explained that the bank contemplated hiking rates by 50 basis points, confirming the bank’s hawkish tone and placing the RBNZ once again miles ahead of any other major central banks in terms of policy normalization and tightening. 3. The country’s economic and health developments The main focus right now will be on how quickly the New Zealand government can get the virus situation under control. We’ve already heard some good news that the government has been able to trace the source of the recent outbreak and should be able to get the situation under control. This will be a key factor to watch in the next few sessions. After solid Q2 GDP data we saw yields push higher at the front-end, which could see markets price in a possible hike in rates as early as the October meeting, so keeping track of the short end this week. 4. CFTC Analysis Latest CFTC data (updated until 14 Sep) showed a positioning change of +2343 with a net non-commercial position of +6206. With the overall optimistic rate path from the RBNZ, the bias for the currency remains unchanged, and with a small net-long positioning the current spot levels for the NZD still looks attractive for med-term buyers, but short-term moves do still look a bit overdone at current levels. CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF. Swiss economic data rarely proves market moving; and although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall bearish tone and a preference for being behind the ECB in terms of policy decisions. The market's overall risk tone has improving considerably from just a year ago because of the global vaccine roll out and the unprecedented amount of monetary policy accommodation and fiscal support from governments. The Delta variant and subsequent impact on growth expectations is of course a sobering reminder that risks remain. Thus, there is still a degree of uncertainty and risks to the overall risk outlook remains which could prove supportive for the safe havens like the CHF should negative factors for the global economy develop. However, on balance the overall risk outlook is continuing to improve and barring any major meltdowns in risk assets the bias for the CHF remains bearish in the med-term. 2. Idiosyncratic drivers for the CHF Despite the negative drivers, the CHF has remained surprisingly strong over the past couple of weeks. This divergence from the fundamental outlook doesn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests. Recent research from the team has revealed an interesting correlation between the CHF simultaneous price moves in Gold and the USD which could explain some of the recent price action. We also need to be careful of the possibility of SNB FX intervention. Apart from that, ING investment bank has recently argued that recent CHF strength could be due to the lower inflation in Switzerland compared to the EU which meant that the real trade-weighted CHF has been trading too cheap. They also expanded that the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful FX intervention lately. The bottom line is that there are often plenty of idiosyncratic drivers which might or might not impact the CHF and makes short-term price fluctuations a mixed bag for the most part. 3. CFTC Analysis Latest CFTC data (updated until 14 Sep) showed a positioning change of -6098 with a net non-commercial position of -5878. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF has now moved back into net-short territory as one would expect from a currency with an overall med-term bearish outlook. Even though we expect the currency to continue weakening in the med-term, any drastic escalation in risk off tones could continue to provide support for the safe-haven currency in the short-term.
by thunderpips
1
NZD CHF - FUNDAMENTAL DRIVERSNZD FUNDAMENTAL BIAS: BULLISH 1. Developments surrounding the global risk outlook. As a high-beta currency, NZD has benefited from the market's improving risk outlook over recent months as participants moved out of safehavens and into riskier, higher-yielding assets. As a pro-cyclical currency, the NZD enjoyed upside alongside other cyclical assets going into what majority of market participants think was an early post-recession recovery phase. As long as expectations for the global economy remains positive the overall positive outlook for risk sentiment should be supportive for the NZD in the med-term , but the recent short-term jitters and risk off flows once again showed us why risk sentiment is also a very important short-term driver for the currency. 2. The Monetary Policy outlook for the RBNZ New Zealand’s Zero Covid strategy caused quite the rigmarole for the NZD this week as market participants were forced to unwind some of their very aggressive expectations for rate hikes going into the meeting. The unwind was so aggressive that OIS prices dropped from a 100% chance of a hike to just above 50% at some stage. The RBNZ chose to leave rates unchanged, but despite the virus escalation they offered a much more optimistic tone compared to their prior meeting by updating their rate path projections to show 7 projected hikes between Dec 2021 and H1 2023 (bringing the OCR to 2.0%). This was even more aggressive than the already aggressive bets heading into the meeting before the covid news hit the wires. The Governor also later explained that they need to continue to move on policy and cannot wait for uncertainty as they have a lot of work to do to get back to the neutral rate of 2.0%. Also, when asked about Oct Governor Orr said the meeting is live, but also acknowledged that they’ve made it very clear their next move is likely a hike so they can afford to wait. Thus, with the upgraded rate path the med-term bullish outlook remains intact for the NZD. Last week we saw very hawkish comments from RBNZ’s Hawkesby who stated that the bank’s decision not to hike rates last week was mostly to do with optics and not due to perceived risks, and also explained that the bank contemplated hiking rates by 50 basis points, confirming the bank’s hawkish tone and placing the RBNZ once again miles ahead of any other major central banks in terms of policy normalization and tightening. 3. The country’s economic and health developments The main focus right now will be on how quickly the New Zealand government can get the virus situation under control. We’ve already heard some good news that the government has been able to trace the source of the recent outbreak and should be able to get the situation under control. This will be a key factor to watch for the NZD in the next few sessions. 4. CFTC Analysis Latest CFTC data for the NZD (updated until 31 August) showed a positioning change of -1779 with a net non-commercial position of -2141. With the overall optimistic rate path from the RBNZ, the bias for the currency remains unchanged, and with positioning in net-short territory the current spot levels for the NZD still looks attractive for med-term buyers. CHF FUNDAMENTAL BIAS: BEARISH 1. Developments surrounding the global risk outlook. As a safe-haven currency, the market's risk outlook is the primary driver for the CHF. Swiss economic data rarely proves market moving; and although SNB intervention can have a substantial impact on CHF, its impact tends to be relatively short-lived. Additionally, the SNB are unlikely to adjust policy anytime soon, given their overall bearish tone and a preference for being behind the ECB in terms of policy decisions. The market's overall risk tone is improving with coronavirus vaccines being rolled out as well as the unprecedented amount of monetary policy accommodation and fiscal support from governments. Of course, risks remain as many countries are now battling third waves of the virus. As such, there is still a degree of uncertainty and risks to the overall risk outlook which could prove supportive for the CHF should negative factors for the global economy develop; however, on balance the overall risk outlook is continuing to improve and barring any major meltdowns in risk assets the bias for the CHF remains bearish . 2. SNB Intervention Despite the negative drivers, the CHF has remained surprisingly strong over the past couple of weeks. This divergence from the fundamental outlook doesn’t make much sense, but the CHF often has a mind of its own and can often move in opposite directions from what short-term sentiment or its fundamental outlook suggests, thus be careful when trading the CHF and always keep the possibility of SNB intervention in mind. In a recent note ING investment provided their rationale for the recent strength in the CHF and suggests that the lower inflation in Switzerland compared to the EU means the real trade-weighted CHF is trading too cheap. Furthermore, the ECB’s bond buying has meant that their balance sheet is expanding more rapidly compared to that of the SNB, which could have been reasons why the SNB did not see the need for any meaningful intervention lately. However, as intervention is always the possibility it’s a risk to always keep in mind when trading the CHF. 3. CFTC Analysis Latest CFTC data for the CHF (updated until 31 August) showed a positioning change of -119 with a net non-commercial position of +3975. The CHF positioning continued to unwind some of its recent surprising strength over the past few weeks. The CHF still the third largest net-long positioning among the majors, which is at odds with the current fundamental bearish outlook for the currency. At the current level of positioning, one has to argue that the CHF offers attractive levels to sell into, especially versus the NZD which will is expected to offer very attractive carry yield if the RBNZ moves ahead with their planned hike projections. However, there might have been idiosyncratic factors providing support for the CHF, and any drastic escalation in risk off tones could still continue to provide support for the safe-haven currency.
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