News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • #Bitcoin Outlook: $BTCUSD Bounce From 40K, Fake-out or Shake-out? - https://t.co/ixsRMKgCom https://t.co/KDQv4wgfot
  • While JPY gets clobbered, CHF decides to turn a blind eye to yields $CHF https://t.co/MViWZiiPZ7
  • The surprise 100 basis point cut from the Turkish central bank (to 18%) generated the expected pressure for $USDTRY. That said, I don't think it was the market that decided the momentum should die out at 8.8000 again... https://t.co/4jmOPnzzK9
  • surprised that $NQ is holding up so well with what rates are doing. 10 year yield at a 2 month high, $Nasdaq still holding resistance at prior support https://t.co/UBWBxY2nFC
  • The S&P 500 has recovered all the ground it lost at the start of the week and the Dollar has slumped post FOMC and PMIs. DailyFX's @JohnKicklighter gives a brief overview of the market for Thursday! https://t.co/jihKB44ELn
  • https://t.co/lbNvVbQq4n
  • The future taper isn't enough to urge the Dollar to a critical bullish break. In turn, $EURUSD has reversed shy of of August's trough and keeps in play an inverse head-and-shoulders pattern with a neckline at 1.19 https://t.co/EgUtX6Pmvy
  • USD/CAD testing short-term moving average support. Traders have cut their long exposure over the week. Get your market update from @nickcawley1 here:https://t.co/iEL5cbFnHs https://t.co/6kLkUFkFvU
  • In the West, that qualifies as a default action. Let's see how it is treated in the world's second largest economy https://t.co/PKWy7SE8Dt
  • Some Evergrande offshore bondholders do not expect company to make interest payment by Thursday deadline
NZD/USD Rate Selloff Sends RSI Towards Oversold Territory

NZD/USD Rate Selloff Sends RSI Towards Oversold Territory

David Song, Strategist

New Zealand Dollar Talking Points

NZD/USD extends the decline following the Reserve Bank of New Zealand (RBNZ) interest rate decision on the back of US Dollar strength, and recent price action indicates a further decline in the exchange rate as it extends the series of lower highs and lows from the start of the month.

Advertisement

NZD/USD Rate Selloff Sends RSI Towards Oversold Territory

NZD/USD has taken out the July low (0.6881) as the RBNZ kept the official cash rate (OCR) at the record-low of 0.25%, and the New Zealand Dollar may continue to depreciate against its US counterpart as a growing number of Federal Reserve officials show a greater willingness to switch gears.

In contrast, the renewed lockdowns across Asia/Pacific may keep the RBNZ on the sidelines as “the need to reinstate COVID-19 containment measures in some regions highlights the serious health and economic risks posed by the virus,” and the central bank may stick to the same script at its next meeting on October 6 as “the Committee remains alert to the supply disruptions that COVID-19 can create.”

Nevertheless, it seems as though it will be a matter of time before the RBNZ normalizes monetary policy as Governor Adrian Orr and Co. acknowledge that “New Zealand economy had rebounded more strongly than most countries,” and the central bank appears to be on track to lift the OCR off of the record-low as “the Committee agreed that their least regrets policy stance is to further reduce the level of monetary stimulus.”

Until then, NZD/USD may continue to give back the advance from the November 2020 low (0.6589) as it out the July low (0.6881), but a further decline in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen earlier this year.

Image of IG Client Sentiment for NZD/USD rate

The IG Client Sentiment report shows 60.80% of traders are currently net-long NZD/USD, with the ratio of traders long to short standing at 1.55 to 1.

The number of traders net-long is 4.89% lower than yesterday and 18.89% higher from last week, while the number of traders net-short is 12.10% lower than yesterday and 14.55% lower from last week. The rise in net-long position has fueled the shift in retail sentiment as 45.78% of traders were net-long NZD/USD last week, while the decline in net-short position could be a function of profit-taking behavior as the exchange rate trades to a fresh yearly low (0.6809).

With that said, recent price actionindicates a further decline in NZD/USD as it extends the series of lower highs and lows from the start of the month, and looming developments in the Relative Strength Index (RSI) may indicate a further decline in the exchange rate if the oscillator pushes into oversold territory for the second time in 2021.

NZD/USD Rate Daily Chart

Image of NZD/USD rate daily chart

Source: Trading View

  • Keep in mind, a head-and-shoulders formation materialized in the first quarter of 2021 as NZD/USD pushed below the 50-Day SMA (0.6998) for the first time since November, and the decline from the yearly high (0.7465) may turn out to be a change in the broader trend as the exchange rate trades below the 200-Day SMA (0.7108) for the first time since June 2020.
  • In turn, NZD/USD continue to give back the advance from the November 2020 low (0.6589) as the 50-Day SMA (0.6998) now reflects a negative slope, and looming developments in the Relative Strength Index (RSI) may show the bearish momentum gathering pace if the oscillator pushes into oversold territory for the second time in 2021.
  • Need a break/close below 0.6810 (38.2% expansion) to open up the 0.6700 (38.2% retracement) to 0.6710 (61.8% expansion) region, with the next area of interest coming in around 0.6640 (23.6% expansion).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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

DISCLOSURES