Sheep, Milk and the Kiwi …

7:1 sheep to people ratio in New Zealand

7:1 sheep to people ratio in New Zealand

In New Zealand, there is roughly 7 sheep to every person.  They have a lot of sheep and sheep = cotton, correct?   The country has the highest density of sheep per capita in the world.  However, this year has seen the sheep numbers fall to their lowest level in 75 years.

Around 1987 farmers to took to dairy farming and that overtook conventional sheep farming which until then had been the backbone of the New Zealand Economy.  Take a look at the chart below … at most inflection points in Cotton Futures the KIWI followed suite.

 

KIWI and Cotton Futures .. they turn together

KIWI and Cotton Futures .. they turn together

 

Mooooo

Mooooo

As discussed above, the dairy industry is the backbone of the economy.  Prices have plunged.

http://www.wsj.com/articles/new-zealand-dairy-farmers-hope-for-relief-in-globaldairytrade-auction-1434442028

Below is a chart showing Class III Milk future w/ the KIWI overlaid on top of it. Note, milk futures have completed a buy pattern so prices “should” start back up and therefore KIWI can potentially find some support.  Emerging Market Currencies are at an extreme low w/ regard to sentiment.

note the brown line (KIWI vs USD) and how it tracks milk ...

note the brown line (KIWI vs USD) and how it tracks milk …

The next chart below is of Non Fat Milk futures (continuous monthly) and note the synchronization of tops and bottoms.  These are the lowest prices in decades ….

Milk Nonfat Dry lowest in decades ...

Milk Nonfat Dry lowest in decades …

 

Here’s the KIWI today … decimated sentiment for EM Currencies, RECORD low dairy prices, cotton hanging in there and a big old thump into very oversold bullish divergence .. it’s going to start up today or soon.

 

KIWI vs USD Monthly

KIWI vs USD Monthly

so this looks so PROMISING but when I put the EEM (Emerging Market ETF) w/ the KIWI overlaid on top of it I see a very nice symmetry BUT I also see a CLIFF OF SUPPORT that the EEM is about to fall off.  OUCH ….

Main20150807175226

EEM:

note EEM and pay attention closely. IF WE ACCELERATE THRU THE 4+ YEAR SUPPORT THEN EM FX SHOULD FOLLOW …playing a bounce for the FX so this is a major area to watch for Risk and Reward …

 

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