Home.forex news reportPremium Watchlist Recap: January 21, 2025

Premium Watchlist Recap: January 21, 2025

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This week our currency strategists focused on the New Zealand Q4 2024 CPI Report for potential high-quality setups in the New Zealand dollar pairs.

Out of the four scenario/price outlook discussions this week, only one discussion arguably saw both fundie & technical arguments triggered to become potential candidates for a trade & risk management overlay.

Watchlists are price outlook & strategy discussions supported by both fundamental & technical analysis, a crucial step towards creating a high quality discretionary trade idea before working on a risk & trade management plan.

If you’d like to follow our “Watchlist” picks right when they are published throughout the week, you can subscribe to BabyPips Premium.

NZD/CHF: Tuesday – January 21, 2025

NZD/CHF 1-Hour Forex Chart by TradingView

NZD/CHF 1-Hour Forex Chart by TradingView

On Tuesday, our strategists had their sights set on the Q4 2024 New Zealand CPI report and its potential impact on the New Zealand dollar. Based on our Event Guide, expectations were for quarterly inflation to tick up from 0.4% q/q to 0.5% q/q, with the annual rate holding steady at 2.2%. With those expectations in mind, here’s what we were thinking:

The “Kiwi Climb” Scenario:

If the CPI came in hotter than expected, we anticipated this could dampen expectations of near-term RBNZ rate cuts. We focused on NZD/CHF for potential long strategies if risk sentiment was net positive, especially given SNB Chairman Schlegel’s recent comments about cutting rates and curbing franc strength. If risk sentiment turned negative, GBP/NZD shorts looked promising given the BOE’s recent dovish shift and weak UK data.

The “Kiwi Collapse” Scenario:

If New Zealand’s inflation data came in below expectations, we thought this could fuel RBNZ easing expectations. In this case, we considered AUD/NZD for potential long strategies in a risk-positive environment, particularly given the RBA’s recent hawkish stance. If risk sentiment leaned negative, NZD/JPY short made sense given the high expectations of a BOJ rate hike and the yen’s “safe haven” status among the trading community.

What Actually Happened:

The Q4 2024 New Zealand CPI report came in slightly above expectations:

  • Quarterly inflation rose 0.5% q/q as expected
  • Annual inflation held steady at 2.2% y/y, marginally above the RBNZ’s 2.1% forecast
  • Core inflation remained elevated at 3.0% annually
  • Transportation costs were a major driver, with international air transport prices up 6.6%
  • Housing costs continued to show pressure with rental prices up 0.8% q/q
  • Non-tradeable inflation eased to 4.5% y/y from 4.9% in Q3

Market Reaction:

This outcome fundamentally triggered our NZD bullish scenarios, and with risk sentiment leaning positive after as there was some level of Trump tariff fear easing, we though that NZD/CHF had the best odds of potentially positive outcomes.

Looking at the NZD/CHF chart, the pair actually consolidated after the NZ CPI event, even after SNB President Schlegel’s comments about an openness to negative interest rates if need likely added some pressure on the franc. It wasn’t until the Thursday session when risk-on assets began taking a bid, correlating with Trump’s comments at Davos, where he called for an end to the Russia-Ukraine conflict, for lower oil prices, and for the Fed to lower interest rates.

Broad risk-on Sentiment carried on through the end of the week, where NZD/CHF closed just under its intraweek highs.

The Verdict:

So, how’d we do? The fundamental trigger of above-forecast inflation dampened immediate RBNZ rate cut expectations, and the pair moved higher with rising broad risk-on sentiment as expected. Our technical analysis accurately identified the R1 and R2 targets as potential areas of resistance, both of which were tested before the end of the week.

For traders who simply long positions after the CPI beat the position spent very little time in negative territory and the rise higher was pretty straightforward, resulting in little need for very active trade management. For our Premium members, we decided to create an example trade structure based on a swing time frame as a guide on different ways to think about risk and raise awareness on potentially influential events ahead, and the outcome so far has been net positive.

Overall, we think our original discussion was “highly likely” supportive of a net positive outcome and we hope that was the case for all traders out there watching this pair!



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