Focus turns to central bankers to qualm uncertainty

Markets have been edgy this week with much of the movement stemming from currency pairs as developed world's central banks and economies took centre stage as risk begins to build up. Most notably was the Japanese Yen's remarkable appreciation against all of its major peers with the government attempting qualm bullish optimism by saying it was ready to intervene in the market at any given time.

The abrupt appreciation of the Yen flies in the face of policymakers at the Bank of Japan who have tried but failed in their attempts to depreciate the currency with extremist monetary policy that's seemingly had an inverse impact.

We also saw shakiness in the Euro as a number of issues take strain on the economic bloc. The ECB came out reassuring the market of it's willingness to up its ante if the stimulus measure currently in place failed to produce the desired outcome market participants had been expecting.

Apart from the monetary woes weighing heavily on the Eurozone, political scandals are not afar with leaked transcripts of conversation between IMF officials providing impetus to believe that negotiations surrounding a renewed bail out deal with Greece and the Troika is set to display the same indecisiveness produced at the beginning of last year.

Notwithstanding this, the worry that the Brexit referendum vote will need more convincing than once thought adding further complexity to matter within the region with the date of both aforementioned issues falling within a tight schedule that wouldn't allow policymakers to give enough attention to each.

It was the turn of Fed Chair Janet Yellen to face the scrutiny of the market's nervousness after she sat on a panel with former Federal Reserve Chairman Paul Volcker, Alan Greenspan and Ben Bernanke discussing the state of the US economy as well as the direction of monetary policy around the globe. Yellen said she did not believe that the US economy had formed a bubble and there were no risks of a burst either. This after presidential candidate Donald Trump made remarks that the US economy could be on the brink of implosion at anytime.

Evidence is pointing to the market becoming unsettled and the lack of response to central bankers dovish tones  is spelling danger for the weeks that lie ahead. The focal point around major central bankers of the world happens as the backdrop of political uncertainty takes hold of fears however this time the once turned to financial superheroes of yesteryear are tripping up over their own powers to save the world economy from it's inevitable fate.

It's been a rocky week for the $5.3 trillion-a-day forex market https://t.co/Uz3hFWDqG4 pic.twitter.com/N23tksqJ3I

— Bloomberg (@business) April 8, 2016

Discussing it earlier this week in Travelling Technicals I had said that the New Zealand NZX 50 Index looked to be the best looking technical chart I've done analysis on so far this year and it proved the best performing index this year amongst its developed market peers.

The reasoning could lie in the fact that New Zealand's economy operates with a wide exposure to agricultural production which probably gives a clue to the performance. In the article below its said that the lack of foreign investment and defensive stock all played its part in helping lift the index. If this were the case it could possibly be one of the first indications that investors are starting to channel their capital towards defensive plays as they expecting a world recession.

New Zealand is a rare case of a developed market that's posting gains this year https://t.co/JDp7BT4ixs pic.twitter.com/Gv1Jm42Xwh

— Bloomberg (@business) April 8, 2016

Travelling Technicals with Global Indices: NZX 50

Today's technical report is focused on New Zealand, a nation that's small in population but prominent in global trade and financial markets with its local currencies, the New Zealand Dollar or otherwise known by its nickname the Kiwi, making up one of the major currencies that's actively traded on a daily basis around the world having distinguished itself as a gauge for commodity driven economies.

Having a wide exposure to agricultural production it's not surprising to see that two of its main trading partners namely Australia and China contribute a significant amount of trade to the Oceanian country equating to roughly 40% of all exports.

Politically the country is fairly stable if not away from the world spotlight of scandal suggesting a safe destination for investment, a requirement that's becoming ever more wanted in current financial market climates. Let's get to the charts;

Monthly

The most distinct feature on this chart is probably the performance it's exhibited after breaking through the previous highs of 2007, cementing its position as one of the few global equity indexes that has successfully overcome this hurdle. Last month's candle indicates the strength of the bulls by stampeding through the field. with ease. 

There's a clear feel of momentum in this chart with a 13 SMA overlaying the price candles to assess the level of buoyancy driving the price higher. The MACD lies clouds above the zero line once again shifting the bias in favour of the bulls. I've labelled a period of impulse, a situation where there's a brief pause in momentum followed by a renewed surge in price. If we were to look at the current indications on the MACD, it appears as if momentum is not fading away as suggested by the histogram. 

It's important to note the sharp uptrend that's been in place since the middle part of 2012 remains intact. I use the word sharp because the steepness of the gradient is not sustainable over the long term so it's vital that any signs of extreme weakness shouldn't be taken lightly. The most probable cause of the preceding candle was the covering of short positions indicating the markets propensity to find a top so we can't discount this fact.   

Weekly

On the weekly I've drawn in the sharp uptrend we saw on the monthly but you'll notice it doesn't look as steep as the monthly. I've also added in vertical lines to indicate the rallies that experienced an accelerated ascent. The reason why I've added the lines in is to show that after an extended period where no significant pullback was experienced, the chart either goes through a phase of consolidation or tapers down on momentum and steadily climbs higher at a slower rate. 

Vertical Line 1 and 2 are evidence of this with the most recent line 3 showing similar characteristics to prior rallies and looking  rather stretched at the moment. Given the increased levels of volatility being found in most markets at present I would think the possibility of seeing a pullback as likely. If we were to consolidate in a sideways pattern we would see larger ranges candles than what we've seen previously. 

Overall the chart looks steady for which you can't fault it but as said before buying into it now might be unwise. If we see a pullback materialise you could use that as a signal to reassess the valuation and perhaps step into the trend but be ensured to do so with an optimal edge.