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USD Hit by Soft CPI- NZD/USD Interest Declines Ahead of China GDP

USD Hit by Soft CPI- NZD/USD Interest Declines Ahead of China GDP

2016-04-14 16:30:00
David Song, Currency Strategist
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Talking Points:

- USDOLLAR Struggles Amid Soft CPI Report- U. of Michigan on Tap.

- NZD/USD Vulnerable to Slowing China GDP Amid Failed Test of March High.

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11878.81

11919.14

11864.07

-0.06

95.72%

USD Hit by Soft CPI- NZD/USD Interest Declines Ahead of China GDPUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR pares the overnight advance following the softer-than-expected U.S. Consumer Price Index (CPI) report, with both the headline and the core rate of inflation narrowing in March; may increase the Fed’s scope to further delay the normalization cycle.
  • Nevertheless, the near-term series of higher highs & lows may encourage a larger rebound especially as the U. of Michigan Confidence survey is rebound to 92.0 from 91.0 in March.
  • Despite the bearish tilt in the Relative Strength Index (RSI), the failed attempts to close 11,826 (61.8% expansion) to 11,843 (38.2% retracement) may highlight a larger rebound, with a closing price above 11,951 (38.2% expansion) to 11,965 (23.6% retracement) raising the risk for a further near-term advance in the USDOLLAR.

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NZD/USD

NZD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • NZD/USD appears to have marked a failed run at the March high (0.6965), with the New Zealand dollar at risk for further weakness as the slowdown in the region’s Purchasing Manager Index (PMI) for manufacturing fuels bets for additional monetary support.
  • With China’s Gross Domestic Product (GDP) report anticipated to highlight a slower rate of growth for the first-quarter of 2016, the slowdown in global growth may encourage the Reserve Bank of New Zealand (RBNZ) to further embark on its easing cycle as Governor Graeme Wheeler endorses a dovish outlook for monetary policy.
  • In light of the recent weakness, the next downside hurdle comes in around 0.6690 (161.8% expansion) to 0.6710 (50% retracement), with interim support coming in around 0.6570 (100% expansion) to 0.6590 (38.2% retracement).
NZD/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows increased volatility in retail positioning, with the FX crowd flipping back net-short NZD/USD on April 12.
  • The ratio currently stands at -1.13 as 47% of traders are long, with long positions narrowing 22.4% ahead of the weekend, while open interest stands 6.4% below the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USD Hit by Soft CPI- NZD/USD Interest Declines Ahead of China GDP

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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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