Forecasts

Dollar Looks to Yellen to Turn Volatility into Trend, Will She Acquiesce?

Fundamental analysis and market themes.

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Dollar Looks to Yellen to Turn Volatility into Trend, Will She Acquiesce?

Fundamental Forecast for Dollar:Neutral

  • In contrast to many other financial market benchmarks’ grind to inaction, the Dollar has maintained a high volatility
  • Top event risk this week includes housing and trade data, details on 2Q GDP conditions and Yellen’s comments at Jackson Hole
  • See our 3Q forecasts for the US Dollar and market benchmarks on the DailyFX Trading Guides page

Indecision is a universal market theme. And, the Dollar has not escaped the sedation. A confluence of conviction and participation is proving exceptionally difficult to muster due to the growing sense of skepticism in fundamental value as well as the seasonal lull that we expect through the ‘Summer doldrums’. Eventually this quiet will end – either as market participants naturally return to their desks after holiday or through an inevitable eruption in complacency. But what are the changes of this happening through the coming week?

Seasonal inactivity has added a further burden to an already encumbered market. Historically, August is the ‘quietest’ month for the S&P 500 – what I consider a good proxy for the ‘market’ given its prevalence and familiarity. Volume through the month of August is historically the lowest of the year with the exception of the shortened February or holiday-loaded December. That said, the VIX volatility index (increasingly a necessary go-to for traders in any market) has also seen a significant climb in the three months starting with August. Just as a traditional ‘risk asset’ would be beholden to these conditions, the Greenback is similarly bound to the tide whether through focus on the Fed rate forecast, its position as a safe haven or from the indirect influence from its more beset major counterparts.

It is unlikely that volume rises universally over the coming week. The seasonal replenishment does not typically occur at this time, and it has proven exceptionally difficult to motivate the masses to rush back to the market in response to a single catalyst or theme. A cap on participation means a cap on the conviction that is necessary for trend development for a currency at the center of so many crucial themes. That said, volatility will likely remain elevated and opportunity found in the application of appropriate strategy.

While the equity-based VIX volatility index has hit extreme lows – consistently below the 12 ‘vol’ mark – and the S&P 500 carves out one of its smallest ranges relative to its elevated price on record, activity in the FX market has maintained a relative premium. The general FX VIX is still double the level it plunged during the exceptionally quiet period through the summer of 2014. Volatility for the Dollar in particular is even higher. This is due in large part to the amplitude in speculation associated with diverging and competitive monetary policy efforts around the world. The Fed’s position in particularly unique as it is one of the few major policy groups that actually maintains a hawkish bias.

While the market is only pricing in a 50-50 chance that the Fed will hike rates this year; the contrast to the desperate and persistent stimulus programs form the ECB, BoJ and BoE raise the US currency’s profile. This past week in fact, we saw a remarkable series of volatile days for the USDollar founded on changing tides in speculation for Fed timing based on the rhetoric of FOMC members and a few key pieces of data. It is worth noting, however, that the currency’s reaction didn’t hang on every word spoken by the central bankers. Many times volatility would follow the course of skepticism after a member (Dudley, Williams, Bullard) attempted to crack the market’s skepticism of hikes in 2016.

With this focus and skepticism in mind, the coming week’s Jackson Hole Symposium will carry significant weight. The meeting of central bankers, economists and business leaders from around the world has generated traction in the past. On Friday, Fed Chairwoman Janet Yellen is scheduled to speak, and Dollar traders will look to her break the impasse between FOMC party line and market skepticism. However, she has shown time and again that she is not interested in generating volatility and giving traders clarity.



Euro Traders Look to US Dollar for Next Major Moves

Quantitative analysis, algorithmic trading, and retail trader sentiment.

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Euro Traders Look to US Dollar for Next Major Moves

Fundamental Forecast for Euro: Neutral

The Euro surged to multi-month highs versus the US Dollar despite a fairly uneventful week for both Europe and the US. And indeed the release of official minutes from both from both the European Central Bank and US Federal Reserve’s recent meetings did little to alter market outlook. A fairly sparse economic calendar next week promises little in the way of foreseeable volatility, but the recent Euro rally makes it clear we can’t rule out sharp currency swings.

It would take major surprises out of the coming week’s European Markit PMI industry surveys or German IFO business confidence figures to elicit big reactions out of the EUR/USD.

Traders will need to look across the pond for a more likely market-mover in the US Federal Reserve’s Jackson Hole Policy Symposium starting August 26. The Federal Open Market Committee left interest rates unchanged and gave relatively little indication it would raise interest rates at its September meeting. And it feels like it was a very long time ago that expectations of Fed interest rate hikes fueled US Dollar gains.

A planned speech from Fed Chair Janet Yellen should shed further light on whether the central bank will keep interest rates lower for longer, and overall risks seem weighed to the downside for US yields and the US Dollar itself. Fed Funds futures currently show a mere 20 percent chance the FOMC will raise interest rates at their September meeting, and the same contracts show only a 50 percent chance that rates will move higher through 2016. It feels like it has been a long time since the US central bank seemed likely to raise interest rates; the US Dollar has fallen fairly consistently as traders adjust to the prospect of lower yields. The Euro has been quick to benefit as it trades at multi-month highs.

The prospects for European interest rates are even worse than that of the US, however; at some point the Euro will need to trade on its own merits. Recent ECB rhetoric suggests the bank is in a “wait and see” mode as it does not want to ease monetary policy further until it sees further signs of persistently low inflation and growth. Its main refinancing rate already stands at 0.00% while its deposit facility rate is strongly negative at -0.40%. Further policy easing seems likely as Overnight Index Swaps predict 20 percent odds of a further rate cut in September. ECB officials have nonetheless expressed discomfort from cutting rates further into negative territory; at a certain point interest rate expectations may have little marginal effect on the EUR.

Event risk for the Euro remains low through the foreseeable future, and the next major move for the EUR/USD would likely come on surprises out of the US. In this sense, trading the EUR/USD seems roughly akin to trading the Dow Jones FXCM Dollar Index. Volatility is certainly possible, but we’re not expecting much out of the EUR side of the trade for some time to come.



Clues and Hints Point to BoJ Bazooka in September: Will USD/JPY Respond?

Price Action, Swing & Short Term Trade Setups

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Clues and Hints Point to BoJ Bazooka in September:  Will USD/JPY Respond?

Fundamental Forecast for JPY: Bearish

- Despite USD Slide and Risk Shake, USD/JPY Holds 100 and Oil Climbs

- Traders and BoJ Watch as USD/JPY Lurks at 100

- If you’re looking for trading ideas, please check out our trading guides; and if you want something more short-term in nature, our SSI indicator may be able to help.

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Last week we looked at the strength in the Yen as markets continued to price-out QE hopes after the Bank of Japan failed to deliver at their July meeting. But as we’ve been noting, just because the BoJ didn’t deliver on expectations in July, this doesn’t mean that the bank is yet ‘done.’ This is the same bank that’s triggered such radical policies like buying stocks with QE in October of 2014; and then making the surprising move to negative rates earlier in 2016. This type of risk assumption is emblematic of a Central Bank with their back against the wall. The fact that these moves so far have seemingly failed aren’t likely to make the BoJ more risk averse, and if anything, may trigger the opposite as the bank seeks new and inventive solutions to fight the decades-long saga of deflation in the Japanese economy.

The issue at the moment is that Japan may need to investigate another manner of QE, as the bank is running out of bonds to buy. After triggering a gargantuan bond-buying program in 2013, the Bank of Japan has been like a vacuum for Japanese Government Bonds. Many banks need these types of securities for collateralization, and as BoJ bond-buying has raged for the past three years many of these bonds have been moved to the ledger of the Bank of Japan. This additional demand has, of course, driven prices higher and yields lower; but the sleeping giant is the lower amount of liquidity in a key asset class that could, quite frankly, become extremely troubling should inflation or rates tick-up. As rates tick up and prices move lower, the lessened liquidity could exacerbate the ‘plunge’ in prices.

As of most recent data, the Bank of Japan owns 38.1% of the Japanese Government Bond market. Many banks are balking at selling more JGB’s as this can hamstring their own operations given a lack of securities that they can use as collateral for Central Bank and Interbank market transactions. And while this market share could increase, this would only expose deeper risk of the above scenario actually happening. This has led many to believe that the Bank of Japan might try to stem their asset purchases through Japanese Government Bonds.

But this is where matters get interesting… the September BoJ meeting may have been more optimal for that next announcement of an increase in stimulus all along. As we noted just two weeks ahead of that most recent BoJ rate decision, it seemed as though an extension in stimulus was just a matter of time, whether it was more QQE or the extremely-theoretical ‘helicopter money.’ And this echoes the comments from Mr. Shinzo Abe earlier in the summer in which he assured that a ‘comprehensive, bold economic stimulus package’ was coming this fall.

Thickening the plot around the upcoming September meeting are reports that the Bank of Japan has prepared a ‘comprehensive’ review of current QE policies. The expectation is that the bank is going to vigorously defend their QE-strategy , pointing the finger of their policies failures at exogenous factors like falling oil prices and slow growth after a sales tax hike in 2014.

And we’ve even heard from the head of the BoJ, Mr. Haruhiko Kuroda who alluded that investors ‘won’t be disappointed’ by the September review. And earlier today, an advisor to Shinzo Abe said that the Bank of Japan is likely to take ‘bold easing action’ at their meeting next month.

So, details continue to line-up for this upcoming September Bank of Japan meeting to be very, very interesting. The big question is when markets might actually begin to try to anticipate this weakening in the Yen, as the currency is continuing to trade near longer-term resistance levels against many major currencies, including the psychological ¥100.00-spot against the U.S. Dollar.

Given the risk-reward landscape of the Japanese Yen at the present, with significant strength likely to be isolated to extreme risk-aversion scenarios at which point down-side could be capped with stops situated around those levels of resistance, we’re initiating a bearish bias on the Japanese Yen for the week ahead.



Post-BoE GBP/USD Weakness to Persist; Downside Targets in Focus

Central bank policy, economic indicators, and market events.

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Post-BoE GBP/USD Weakness to Persist; Downside Targets in Focus

Fundamental Forecast for GBP: Bearish

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GBP/USD stands at risk of giving back the rebound from the July low (1.2788) as the Bank of England (BoE) reverts back to its easing cycle, while positive data prints coming out of the U.S. economy boosts bets for at 2016 Fed rate-hike.

The Monetary Policy Committee’s (MPC) multipronged approach (fresh record-low interest rate, a new Term Funding Scheme, GBP 10B in corporate-bond purchases along with an addition GBP 60B in government-bond purchases) to mitigate the spillover effects of ‘Brexit’ casts a bearish outlook for the sterling especially as Governor Mark Carney keeps the door open to further support the U.K. economy. Indeed, the BoE may continue to push monetary policy into unchartered territory as the central bank cuts its growth forecast and warns ‘a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year,’ but the fresh remarks from Governor Carney suggests the central bank will avoid pushing the benchmark interest rate into negative territory as the committee enlists the ‘Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate.’ Despite speculation for additional monetary support, the BoE’s reluctance to implement a negative-interest rate policy (NIRP) may limit the downside risks for GBP/USD as the central bank puts a floor on borrowing-costs.

At the same time, the 255K expansion in U.S. Non-Farm Payrolls (NFP) may put increased pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy especially as the U.S. economy approaches ‘full-employment,’ and the key data prints due out next week may boost interest-rate expectations as Retail Sales are projected to increase another 0.4% in July, while the U. of Michigan Confidence survey is anticipated to rebound in August. Signs of stronger consumption may heighten the appeal of the dollar and encourage Fed officials to adopt a hawkish tone as it remains one of the leading drivers of growth and inflation, but Chair Janet Yellen may attempt to buy more time at the next quarterly policy meeting in September as the U.S. Presidential election clouds the fiscal outlook. With that said, the Fed may endorse a wait-and-see approach for the foreseeable future as the committee argues ‘market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months,’ and the dollar stands at risk of facing additional headwinds over the near-term as central bank officials largely wait for evidence of stronger inflation.

Post-BoE GBP/USD Weakness to Persist; Downside Targets in Focus

Nevertheless, the long-term downward trend in GBP/USD may reassert itself over the days ahead as the pair fails to preserve the wedge/triangle formation carried over from the previous month, and the continuation pattern foreshadows further losses for Cable especially as it carves a new series of lower highs & lows in August. With that said, the next downside region of interest comes in around 1.2920 (100% expansion) to 1.2950 (23.6% expansion), with a break of the July low (1.2788) opening up 1.2630 (38.2% expansion).



Gold Prices Primed for Volatility- All Eyes on Jackson Hole

Short term trading and intraday technical levels

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Gold Prices Primed for Volatility- All Eyes on Jackson Hole

Fundamental Forecast for Gold:Neutral

Gold prices were relatively flat this week with the precious metal up just 0.57% to trade at 1343 ahead of the New York close on Friday. The move was accompanied by a decline in the greenback with the Dow Jones FXCM U.S. Dollar Index down 0.60% on the week after posting a 0.35% recovery on Friday. As

A fresh batch of central bank rhetoric this week saw a shift in interest rate expectations after San Francisco Fed President John Williams cited that, “Despite the very real struggles that some parts of the country, including Alaska, are facing, the broader national economy is in good shape: We’re at full employment, and inflation is well within sight of, and on track to reach, our target. Under these conditions, it makes sense for the Fed to gradually move interest rates toward more normal levels.” At the same time, New York Fed President William Dudley noted that markets were underpricing the likelihood of an interest rate hike while leaving the door open for a move in September. As it stands, Fed Fund Futures are pricing in a 53% probability the next hike will be in December of this year. The implications for higher borrowing costs have continued to put a damper on gold prices, capping the advance near-term.

Heading into next week, Durable Goods Orders & the second revision of U.S. 2Q GDP will be overshadowed by the annual Jackson Hold Economic Policy Symposium. Federal Reserve Chair Janet Yellen is scheduled to speak on Friday and on the back of this week’s central bank commentary, investors will be looking for clues as to the Chair’s willingness and readiness to move on rates despite global efforts to provide further monetary stimulus. For gold, the technicals are clear that a surge in volatility is likely on the horizon for prices heading into the close of the month.

Gold Daily

Gold Prices Primed for Volatility- All Eyes on Jackson Hole

From a technical standpoint, the outlook remains unchanged from last week, “While the broader outlook remains weighted to the topside for gold, it’s unclear as to whether or not the correction off the July highs has run its course….prices continue to hold below key long-term trendline resistance extending off the record 2011 high. This week’s range ties for the smallest weekly range of the year- the last time was the week ending 7/22 (was the low for the month).”

Interestingly enough, this week’s range was even smaller at just 1.76% - (smallest weekly range since 12/25/2015). The last time range was this contracted was just one week before the 2016 open which marked strongest quarterly rally since 3Q of 1986. That’s all to say that gold prices are primed for volatility in the coming weeks. We’ll maintain a neutral bias for now as we continue to hold the monthly opening range. Levels remain unchanged.

Prices remain at, “risk for further losses while below the high-day close at 1355 with interim support seen at 1325/30. We’ll be looking for a break of the objective monthly opening range with a break lower targeting 1303 & a more significant support confluence at 1287 where the 50% retracement of the late May advance converges on a pair of median-lines – Both areas of interest for possible short-side exhaustion / long-entries… ultimately we’re looking higher in gold with a breach above near-term downtrend resistance targeting 1380.” Continue to track this trade throughout the week on SB Trade Desk.

Looking longer-term?

Click here to review DailyFX’s 3Q Gold Projections

---Written by Michael Boutros, Currency Strategist with DailyFX

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Canadian Dollar Split on Weak Data and Crude Oil’s Bull Market

Position Trading based on technical set ups, Risk Management & Trader Psychology.

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Canadian Dollar Split on Weak Data and Crude Oil’s Bull Market

Fundamental Forecast for CAD: Bearish

The price of USD/CAD seemed to breakdown this week far past what most expected. Multiple components led to the Canadian Dollars impressive performance against the US Dollar that hit a speed bump on Friday.

The Recent Economic Data Trend in Canada

The speed-bump came at the hands of an unsatisfactory inflation and retail sales. Retail sales for June dropped to -0.1% v 0.5% expected. Annual inflation also underwhelmed, but by a smaller margin of 1.3% in July vs. 1.4% expectations. Earlier in the week, Existing Home Sales also showed a discouraging -1.3% in July following a prior decline of -0.9%

Last week’s data compounded a string of weak data, which is evidenced by the sharp drop in the Citi Economic Surprise Index for the Canadian Economy. The Surprise Index has fallen from 78.50 in late April to -42.60 as of this morning’s data miss. The index rises or falls depending on whether economic prints beat or underperform economists’ expectations respectively.

As encouraging as the August Bull Market in Oil has been, the non-Oil sector has been very weak and the current price of Oil at less than $50/bbl is still providing negative margins for many E&P firms in Canada. Unfortunately, if we begin to hear from the Bank of Canada about potential easing, we could quickly see the gains of the Canadian Dollar dissipate in a hurry.

Over 2016, the Economic Surprises have been more reliable in Canada than elsewhere in the world. GDP is a lagging indicator and a component of other reports that have already been released. Therefore, the GDP is not the biggest worry for the Canadian economy as the rest the economy grapples with a similar struggle.

Understanding Oil’s August Run

Oil has had a really good month. At the close of trading on Thursday, Oil was up ~22% from the August low of $39.17/bbl. Two components that helped the price of Oil accelerate higher last week was a weak US Dollar after FOMC Minutes confirmed there was discord among the Federal Reserve about raising rates that will likely continue. In addition to the weakening US Dollar, Wednesday’s EIA numbers showed a ~3.5Mln barrel surprise for Crude Oil Bulls.

The expectation ahead of the data was for U.S. Aggregate Crude Oil Inventories was for a build of ~+950k, and the actual print was a draw of ~2,500k barrels. A weak US Dollar and strong demand from the inventory data does seem to provide further support for WTI Crude Oil.

Recently, we noted how low the correlation of Crude Oil and the Canadian Dollar has been. Recently, the correlation has hit an 18-month low, which has prevented the Canadian Dollar from strengthening. If the Canadian Economy is having as much trouble as the Economic Surprise Index is showing, a weak Canadian Dollar is a good thing.

Economic Data on Deck for Canada This Week

Traders will have to wait awhile to get a large data print that has the potential to turn the tide against economic disappointments. Next week’s data points are left to Wholesale Trade Sales on Monday, and that is expected to decline from the prior reading of 1.8% to expectations of 0.1%.

The data point next week that will have everyone’s attention is a speech. This Friday, Fed Chairwoman Janet Yellen will speak at Jackson Hole Policy Symposium, and many are on high-alert for the mention of the falling ‘Neutral Rate’ that could keep the Fed from hiking as much as many hoped.

Sentiment Analysis Shows CAD Bulls May Be On To Something

Canadian Dollar Split on Weak Data and Crude Oil’s Bull Market

The chart above can help you see how sentiment shows turns in the market as well as acceleration points. When looking at sentiment,crowd sentiment has moved positiveproviding favor for more downside.

As of Friday, the ratio of long to short positions in the USDCAD stands at 1.55 as 61% of traders are long. Yesterday the ratio was 1.86; 65% of open positions were long. Long positions are 11.0% lower than yesterday and 3.8% above levels seen last week. Short positions are 6.7% higher than yesterday and 1.9% above levels seen last week. Open interest is 4.8% lower than yesterday and 3.7% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USDCAD may continue lower. The trading crowd has grown less net-long from yesterday but further long since last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

-Tyler Yell, CMT



Australian Dollar May Fall Further on Yellen Jackson Hole Speech

Fundamental analysis, economic and market themes

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Australian Dollar May Fall Further on Yellen Jackson Hole Speech

Fundamental Forecast for the Australian Dollar: Bearish

  • Australian Dollar drops despite supportive economic news-flow
  • Swelling Fed rate hike bets seemingly behind Aussie weakness
  • All eyes now on Janet Yellen speech at Jackson Hole symposium

What do past AUD/USD price patterns say about where it will go next? Find out here.

The Australian Dollar turned lower despite supportive economic news flow on the domestic front. The currency spent most of last week in congestion mode, oscillating in a narrow range against its US counterpart despite better than expected headline readings on wage inflation and employment. Minutes from Augusts’ RBA policy meeting also passed with little fanfare, repeating the argument that supervisory measures cooling the housing market allow room for easing but offering no clear guidance suggesting policymakers will use it.

An inability to rise on supportive news-flow seemed indicative of significant underlying weakness waiting for a trigger to be unleashed. The catalyst would emerge in the final hours of the trading week as Fed rate hike expectations began to swell, undermining support for yield-sensitive assets including high-beta currencies. The shift followed a conspicuous about-face in rhetoric from San Francisco Fed President John Williams, whose pronouncements are closely monitored because the markets see him as a close confidant of Chair Janet Yellen.

Williams published a pointedly dovish essay early in the week, only to be swiftly countervailed by strong hawkish comments from New York Fed President Bill Dudley just hours later. Minutes from July’s Fed policy meeting seemed to amplify the sense of discord among policymakers, with markets ultimately concluding that a divided FOMC will probably translate into longer standstill and punishing the US Dollar. The landscape suddenly changed on Thursday as Williams painstakingly repositioned himself, speaking almost as though he had been chastised to get back in line. He said he would prefer to hike rates “sooner rather than later” and even echoed Dudley’s concerns about the under-pricing of rate hike probability.

A mostly quiet economic data docket in the week ahead will keep the spotlight on this narrative as all eyes turn to a speech from Fed Chair Yellen at the annual Jackson Hole symposium. The gathering has emerged as a venue for key announcements of Fed policy intentions in recent years. If Williams’ retreat last week is representative of Fed leadership’s efforts to corral disparate FOMC members and present a unified hawkish posture, this will be the opportunity for Yellen to drive that message home. The Australian Dollar is likely to find itself on the defensive if this proves to be the case, suffering at the hands of an adverse shift in yield spreads as well as the likely onset of risk aversion.



RBNZ Rate Cut Fails To Derail New Zealand Dollar Trend

Position Trading based on technical set ups, Risk Management & Trader Psychology.

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RBNZ Rate Cut Fails To Derail New Zealand Dollar Trend

Fundamental Forecast for the New Zealand Dollar: Neutral

The New Zealand Dollar is the little (regarding relative G10 GDP) currency that could. Despite the 25bp rate cut by the RBNZ on Thursday morning, the New Zealand Dollar continues to be pushing higher. The irony of the current environment is that the RBNZ is worried about the weak outlook for inflation that they are forecasting another 25bp cut before year-end. However, the relative yield of the New Zealand Dollar is still the highest in the G10 that the global hunt for yield cannot resist New Zealand.

Some market participants were even hoping for a 50pb rate cut on Thursday. Those traders were disappointed and may have led to the initial spike of 0.7335. Over the last 16 years, the RBNZ has only cut 50bps in extreme situations, which the current environment doesn’t appear to warrant.

Another trend this week that the New Zealand Dollar was happy to ride, and in many cases lead was the favor of commodity currencies. In addition to the New Zealand Dollar, the Norwegian Krone, Canadian Dollar, and Australian Dollar have all out-gained the US Dollar last week by greater than 1.25% with the Krone up over 4%.

In addition to the RBNZ rate cut, and promises to provide more easing this year, was the strong Retail Sales print (2.3%QoQ v. 1.0%exp.) The inflation battle that the RBNZ appears to be fighting doesn’t mean the economy is weak. Assistant Governor John McDermott noted that “The economy is growing quite well, so you don’t want to overdo it.” McDermott also noted that tradeable inflation appears to be the headwind that the NZ economy is facing, but then again, so is the rest of the world.

Next week’s economic focus will be on the Employment Change and the Unemployment Rate that is expected at 5.3% on Tuesday. Given the migration boom in New Zealand, employment data has tended to outperform other economies. When looking at Economic Surprises over the past 3-months, the New Zealand Economy has been in line with expectations on average.

For now, it appears the trend of high-yielding currencies going bid will continue despite the threats from the RBNZ to cut again this year. It appears the yield is preferred today over the threat of a possible rate cut tomorrow.

NZDUSD Sentiment Shows Retails Continues To Fight Yearly Highs

RBNZ Rate Cut Fails To Derail New Zealand Dollar Trend

Data source: Speculative Sentiment Index, Chart Source: Python. Prepared by DailyFX Team

NZDUSD - The ratio of long to short positions in the NZDUSD stands at -1.51 as 40% of traders are long. Long positions are 16.6% higher than yesterday and 40.2% above levels seen last week. Short positions are 14.3% lower than yesterday and 31.5% above levels seen last week. Open interest is 4.2% lower than yesterday and 6.6% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the NZDUSD may continue higher. The trading crowd has grown less net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

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