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NZD/USD Struggles Following Daily Auction- Retail Longs Jump 26%

NZD/USD Struggles Following Daily Auction- Retail Longs Jump 26%

Talking Points:

- NZD/USD Struggles on Weak Dairy Auction- Balance of Payments Report on Tap.

- USDOLLAR Remains Bid Ahead of FOMC Despite Mixed Data.

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NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • NZD/USD extends the decline from the Reserve Bank of New Zealand (RBNZ) interest rate decision as the central bank continues to endorse a dovish outlook for monetary policy, while the Global Dairy Trade auction showed a 0.8% decline in Whole Milk Powder prices.
  • Even though New Zealand’s Balance of Payment (BoP) is anticipated to show a narrowing Current Account deficit, the 4Q Gross Domestic Product (GDP) report may spur additional headwinds for the kiwi as the region is anticipated to grow an annualized 2.1% following the 2.3% expansion during the three-months through September.
  • As a result, long-term outlook for NZD/USD remains tilted to the downside especially as RBNZ Governor Graeme Wheeler keeps the door open to further insulate the economy, but need to see a break/close below the 0.6550 (50% retracement) to 0.6570 (1000% expansion) zone to favor a further decline in the exchange rate.
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short NZD/USD since February 16, with the ratio hitting a fresh extreme in March as it slipped to -1.75.
  • Nevertheless, retail sentiment remains off of near-term extremes as it narrows to -1.04, with 49% of traders now long amid a 26.1% jump in long positions from the previous week.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12032.7412041.7812008.150.2058.83%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the mixed data prints coming out of the world’s largest economy, the USDOLLAR extends the advance from earlier this week; may see range-bound prices ahead of the Federal Open Market Committee (FOMC) interest rate decision as market participants gauge the outlook for monetary policy.
  • The updated forecasts for growth, inflation and the interest rate is likely to take center stage as Chair Janet Yellen and Co. are largely anticipated to retain their current policy; may see the FOMC stay on course to implement higher borrowing-costs in 2016 as the U.S. economy approaches ‘full-employment’ while central bank officials remain confident in achieving the 2% inflation-target over the policy horizon.
  • Despite the rebound from the 11,951 (38.2% expansion) to 11,965 (23.6% retracement) zone, the USDOLLAR may struggle to get back above former support around 12,050 (50% retracement) should the FOMC show a greater willingness to further delay the normalization cycle.

Read More:

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--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.