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Talking Points:

- NZD/USD Outlook Remains Constructive; Opening Monthly Range Remains Intact Ahead of RBNZ.

- USDOLLAR Remains Stuck in Near-Term Range Ahead of U.S. CPI, U. of Michigan Confidence.

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NZD/USD

NZD/USD Daily Chart

Chart - Created by David Song

  • Despite the mixed reaction to New Zealand’s 2Q Gross Domestic Product (GDP), NZD/USD may stage a larger recovery ahead of the Reserve Bank of New Zealand’s (RBNZ) September 22 interest rate decision as the pair appears to have marked a failed test of the monthly low (0.7226), with price as well as the Relative Strength Index (RSI) preserving the bullish formations from earlier this year.
  • According to a Bloomberg News survey, all of the 17 economists polled forecast Governor Graeme Wheeler and Co. to keep the benchmark interest rate the record-low of 2.00% next week, but the RBNZ may keep the door open to further embark on its easing cycle as the central bank warns ‘current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.
  • For now, NZD/USD looks poised to preserve the bullish trend back in May following the failure to break below the monthly opening range, with a move back above 0.7330 (38.2% retracement) to 0.7350 (23.6% expansion) raising the risk for another run at the Fibonacci overlap around 0.7410 (78.6% retracement) to 0.7430 (61.8% retracement).
DailyFX SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short NZD/USD since July 29, with the ratio hitting a 2016 extreme during the previous month as it tumbled to -3.41.
  • The ratio currently sits -1.27 as 44% of traders are long, with short positions 56.7% lower from the previous week as open interest stands 23.9% below the monthly average.
  • Will keep a close eye on market participation ahead of the RBNZ interest-rate decision as the SSI figure continues to narrow from the highest reading since 2014.

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

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

US Dollar Index

11959.94

11983.43

11943.73

-0.05

72.71%

NZD/USD Opening Monthly Range Remains Intact Ahead of RBNZ MeetingUSDOLLAR Daily Chart

Chart - Created by David Song

  • The USDOLLAR stands at risk for a larger pullback as the recent slew of data prints continues to cast a mixed outlook for the real economy and dampens the scope for a September Fed rate-hike; may see the greenback continue to face range-bound conditions ahead of the policy meeting next week as Fed Funds Futures highlight narrowing expectations for higher borrowing-costs in 2016, with market participants roughly pricing a 50% probability for a rate-hike by the end of the year.
  • Nevertheless, stickiness in the Consumer Price Index (CPI) accompanied by an uptick in the U. of Michigan Confidence survey may spur a larger dissent within the Federal Open Market Committee (FOMC), and Chair Janet Yellen and Co. may follow as similar path to 2015 especially as the U.S. economy approaches ‘full-employment.’
  • Will continue to watch the monthly range following the failed attempt clear above the 200-Day SMA (11.997) with the USDOLLAR at risk of moving back towards the monthly low (11,851) as the greenback holds below the September high (12,013).
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Read More:

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Risk Starts Week Lower as USD, JPY Gain Traction

DAX: Wobbles on ECB, Trend-line Comes into Focus

NZD/USD 2016 Rally at Risk Sub-7500 as Sentiment Stretches

--- Written by David Song, Currency Analyst

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

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