What Is The KIWI Telling Us and Gold takes a break.

Having been based in Norway for many years (a small open economy dominated by natural resources dependence) I have often kept an eye on countries like New Zealand, as it also faces similar economic challenges.  There are distinct differences

Main export country:

New Zealand:                                                              Norway:

China  25%                                                                   UK  22%

Australia  17%                                                               Germany 16%

U.S.  10%                                                                          Netherlands  11%

Japan  6.4%                                                                  France  6.7%

South Korea  3.25                                                       Sweden  6.7%

NZ: Dairy products accounting for 26%, Meats 13%, Wood 9.1%, Fruits/Nuts 5.6%, Beverages 3.5%

Norway:  Minerals, fuels, oils 62%, Fish 9.5%, Commodities 3.8% Aluminum 3.3%     

With New Zealand’s economy under pressure from a falling housing market, weakening business sentiment combined with a weakening Chinese economy and U.S./ China trade war developments have forced the central bank to aggressively cut rates and even inform the market that negative rates can’t be ruled out.

Norway, as our local readers well know, as seen rates hiked at the latest meeting and Norges Bank has moved to neutral as it awaits developments in the rest of the global economy.

The New Zealand dollar has been sliding since Q2 2018.  This is the playbook for many central banks, aggressive easing and weakening of the currency. 

Norway on the other hand has seen its currency weaken, while the central bank has been hiking rates.

We think if the global economy should start to turn, it will be China that will need to show some pickup in activity, as we think Europe is going to struggle to jump start without a Pan European fiscal stimulus plan. We will keep an eye on the Kiwi for signals that things are picking up in Asia.

The S&P 500 is still struggling to decide the next move as we see good support at the current levels and a difficult task to break higher given growth and political issues.

We have been positive to gold for many months, which we continue to be from a medium and long term view. We are currently thinking that gold is in for a further correction.

In the short term, we expect a test lower, and a break of the $1480 level will confirm our view.  Our advice is that if you are looking to buy, wait and keep your powder dry!

Key events this week:

Chinese stocks are trading sideways as President Trump threatened to ban Chinese companies from listing in the U.S. We think this is a non-event.

There will be a great deal of media attention devoted to the possible impeachment process of President Trump.

Brexit struggles will continue to grab headlines.

Chinese 70th Anniversary will be interesting to watch for signs from the leadership.  Will be interesting to see what will happen in Hong Kong on Tuesday.

PMI reports from Sweden, UK, U.S.

U.S. Factory orders.

RBA cash rate decision.

Employment report from the U.S.

All of these reports will give us a good view of the global economic status and we will see if the manufacturing side of the global economy is holding or sliding further.

Services will also be watched closely to see that they are holding up.

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
Long Mowi ASA2019/09/20210.50205.00218.00206.80-1.76%
Short DNB ASA2019/09/23162.90166.00150.00156.85+3.71%

Visit our Position Tracker to look at all of our realized trades and proven track record!

– Mark W

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