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NZD/USD Retail Crowd Remains Net-Long Despite Bearish Formation

NZD/USD Retail Crowd Remains Net-Long Despite Bearish Formation

2015-06-12 16:20:00
David Song, Strategist
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Talking Points:

- NZD/USD Bearish Formation Continues to Take Shape- Retail FX Sentiment at Extremes.

- AUD/USD Rebound at Risk on Dovish Reserve Bank of Australia (RBA) Minutes.

- USDOLLAR Weakness to Persist on Dovish Fed- Updated Projections in Focus.

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NZD/USD

NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • NZD/USD remains at risk for a further decline despite a near-term divergence with the Relative Strength Index (RSI) as the pair continues to search for support: favor the approach to sell-bounces in kiwi-dollar as the Reserve Bank of New Zealand (RBNZ) reverts back to its easing cycle.
  • With the break of 0.6950 (38.2% retracement), next downside target comes in around the 0.6900 (100% expansion) handle, followed by 0.6865 (50% retracement).
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long NZD/USD despite the RBNZ rate cut, with the ratio approaching extremes as it currently sits at +3.40.

AUD/USD

AUD/USD Daily Chart
  • AUD/USD may face a larger rebound over the near-term following the failed test of key support around 0.7570 (50% expansion) to 0.7590 (100% expansion); need to see a break of the bearish RSI momentum to favor a larger correction.
  • May see the Reserve Bank of Australia (RBA) Minutes drag on the exchange rate should the central bank keep the door open to further reduce the cash rate.
  • In light of the narrowing range, need a break/close above former support around 0.7820 (38.2% retracement) to favor a larger advance in AUD/USD.

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Read More:

EURNZD Threatens Key Resistance Ahead of RBNZ- Longs at Risk Sub 1.59

The Weekly Volume Report: USD/JPY Declines, but Volume Steady

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11860.57

11916.11

11844.02

-0.05

98.27%

NZD/USD Retail Crowd Remains Net-Long Despite Bearish FormationUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Failure to retail the triangle/wedge formation raises the risk for a further decline in the Dow Jones-FXCM U.S. Dollar as it struggles to push back above former support around 11,898 (50% retracement) to 11,901 (78.6% expansion).
  • The fresh updates coming out at the Federal Open Market Committee’s (FOMC) June 17 interest rate decision is likely to heavily impact the greenback as market participants speculate a September rate hike; will keep a close eye on the rate dot-plot to gauge the pace of the normalization cycle.
  • Break/close below the Fibonacci overlap around 11,826 (61.8% expansion) to 11,843 (38.2 retracement) to open up the next downside targets around 11,745 (50% retracement) to 11,759 (23.6% retracement).

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NZD/USD Retail Crowd Remains Net-Long Despite Bearish Formation

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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