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NZDCHF Analysis (Feb, 2022) Borders Open!

New Zealand have finally announced that they'll be opening up their borders to international travellers. This is a huge sign in business and consumer confidence which will likely increase demand for the aviation industry but also allow domestic businesses to open up to tourists again.

The "Endemic" is starting to slow with the omicron variant being less severe than previously, most countries have started vaccination programmes to help prevent the infections and deaths.

What we've also found is that economic data is starting to be bullish, a great sign for the NZD.

Logikfx Technology Summary

What we can see on the technology summary page is a high level glance at the economic indicators driving the value of the currencies selected. In this case we can see that NZDCHF is showing bullish signs in favour of NZD when compared against each other.

Bullish Economic Indicators:

  1. Macro currency strength meter

  2. GDP differentials indicator

  3. Interest rate differentials

  4. Hedge fund positions

In this case we're not actually seeing any bearish signs on the fundamental side which suggests we can focus on any bullish timing signals (technical/ sentiment analysis).

Macro Currency Strength Meter

The macro currency strength meter is showing interesting fundamental signs. What we can see straight away is that the NZD fundamentals are slowly climbing to the upside. Whereas, the CHF fundamentals are slowly shifting to the downside.

This divergence is a great signal to focus on bullish ideas for NZDCHF as it means the fundamental analysis is in our favour. We can therefore, progress throughout the analysis with a bullish fundamental view for NZDCHF.

Gross Domestic Product Differentials

The GDP differentials are one of our long term economic indicators to gauge the strength and weakness of economies. In this case we're seeing the green differential line stay positive and grow moving into 2023, this suggests in the long run New Zealand is looking to grow at a faster pace than Switzerland creating a long term bullish signal.

This overall agrees with our fundamental bias identified by the currency strength meter.

Trade Analysis (Imports/Exports)

AIR, which is the stock ticker name for Air New Zealand is an aviation company in New Zealand. In simple terms they drive people around in planes!

What we've identified is that over the pandemic the aviation took a huge hit due to borders closing, businesses forced to close and lockdowns forcing people to stay where they are. Now that New Zealand have announced a borders opening again we're seeing a huge spike in AIR prices nearly bouncing back to pre-pandemic levels!

This is a huge bullish signal as AIR has a positive correlation against NZDCHF.

MEL, Meridian Energy Limited is a New Zealand electricity generator and retailer. They're one of the largest energy producers in the country and the recent news of borders opening has also spiked prices for MEL.

Again, we're seeing a positive correlation against NZDCHF therefore suggesting we may be in for an upside movement in NZDCHF.

VHP, Vital Healthcare Property is a company that focuses on property investments in the healthcare sector.

"Vital owns a large and diversified portfolio of healthcare assets including many of the leading private hospitals, aged care facilities and out-patient buildings in Australia and New Zealand. Vital’s facilities have been designed to provide high quality patient care." - Vital Healthcare Property

Similarly, VHP has a positive correlation against NZDCHF however this is one of the companies falling in value. This decline goes against our fundamental bias.

Stock Market Analysis

Overall, the stock market in New Zealand has taken a slow downward trend since 2021, dipping significantly in 2022. We're now only seeing a small spike in growth after borders opening and quarantine ending.

If markets continue to grow then we may see this as a bullish sign, however currently the stock market has dipped significantly and the news only created a correction of around 30% meaning investors are still cautious.

Interest Rate Differentials

The interest rate differentials are overall positive suggesting investors would rather keep their cash in interest yielding currencies like NZD over CHF which has negative rates.

Hedge Fund Positions

The hedge funds have also had their eyes on the two currencies.

What we can see is that the open interest for NZD has been rising since January, hitting a positive open interest. This shows that hedge funds are net long NZD!

On the flip side they're net long CHF meaning the big boys in the market are buying NZD and selling CHF.

Price Trends

Throughout the analysis we've reference a potential upside is coming.

The technical analysis may yet be aligned, we're currently seeing a small level of support being created, the question is... will this hold?

The price is still in a strong downwards trend and may require that catalyst for prices to reverse.

Keep a close eye on this pair moving into Q1 of 2022.

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