NZ: Patterns of risk returning to markets

10.53 NZST, Wednesday 17 April 2013

NZ: Patterns of risk returning to markets

By Andrew May (Sales Trader, CMC Markets New Zealand)

Considering the magnitude of this week's stark sell off sentiment, the Kiwi dollar continues to sit resiliently high against its peers, lifted primarily overnight by a supportive Global Dairy Trade auction. We open today just under US 0.8485, €0.6443, £0.5526, JPY 82.88 and AU 0.8174.

Over the course of the past five days we've witnessed a stampede en-masse towards safe haven depots USD and JPY as resources plummeted amidst lower than expected Chinese GDP, low IMF economic forecasts, increased tensions out of the Korean peninsula, a pessimistic German ZEW reading and a tragic end to the Boston Marathon.

But in spectacular fashion and amidst the ruin, US markets staged a phoenix-like recovery overnight as earnings season kicked back into gear. Johnson & Johnson, Coca Cola, Yahoo, and Goldman Sachs all lifting spirits, smashing forecasts and taking with it the DOW up 1% or 157.58pts, defibrillating risk appetite and dropping the VIX in the process.

It seems at present that we'd better get used to this 'see-saw' effect of risk off versus staged recoveries mentality.

However, traders should remain cautious in monitoring the current upward retracement. Cracks may appear in long Kiwi dollar positions as the cavalcade of first quarter results flood in beginning with the March quarter Inflation this morning. A minimal 0.9% (QoQ) is expected, however with drought stricken GDP and unemployment around the corner, the New Zealand dollar may simply find itself taking a 'breather' before a potential slide that could see it supported back to US 81c.
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