Kruger Insights Tuesday – January 21, 2014 by FirstMacro

BinaryOptionsNow | Published on January 22, 2014 at 12:13 am

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By: Joel Kruger

What’s All The Fuss About? – Quite a fuss going on in early Tuesday trade, and not too sure what all the noise is about. The two key events since late New York hours have been the hotter than expected inflation data out of New Zealand and the PBOC liquidity injection. The New Zealand Dollar has found a renewed round of bids on the back of the data, with the expectation that the RBNZ will be forced to hike sooner than later in response to this data. Meanwhile, it seems risks assets have been well bid across the board, perhaps finding some encouragement from the China news. Equities are higher, USD/JPY is higher, EUR/CHF is higher, and currencies are generally bid against the buck. All of this price action does however seem a little odd to me, particularly because it has occurred in the normally tamer and less committed Asian markets. On the surface, the New Zealand data may very well seem to be Kiwi bullish given the yield differential side of the equation, but the prospect of rising inflation and what I believe to be a slowing economy, is not exactly a recipe for optimism. Meanwhile, the fact that the PBOC has been forced to inject liquidity into the markets is great in that it will be helpful to stimulate the economy, but again, the reality is that the very need to inject liquidity should be a bit of a red flag.

kruger insights january 21, 2014

Fade The Craze – So I wouldn’t be so quick to jump over this latest risk rally, and would probably be more inclined to be looking for opportunities to fade the moves. All of the markets mentioned above are at risk for weakness, and all of them have arguably run a little too far too fast. Over the coming sessions, I will look for an opportunity to fade strength in NZD/USD towards 0.8400, and EUR/CHF towards 1.2400. I will stay away from USD/JPY, but am expecting this market to also roll back over for one more decent pullback towards 100.00. At the moment, I am only short US equities via the S&P, but will exit the short and wait for another opportunity to sell should the market race to another record high. I had been long AUD/NZD from 1.0590 and booked some profit on half the position around 1.0660, and was taken out on the remaining half just above cost following the sharp pullback post Kiwi inflation data. I will now be looking for another chance to buy AUD/NZD into the next downside extension towards 1.0500 should we get there. There is a tremendous amount of longer-term support in the 1.0400-1.0500 area and given the extreme oversold nature of technical studies, the prospect for a major base at some point in the near future looks to be quite realistic.

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