Asia AM Digest: NZ Dollar Soars, Pound Continues to Suffer
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The New Zealand Dollar soared after the government named Adrian Orr as the next governor of the RBNZ. The Australian Dollar likewise traded higher, bolstered by broadly risk-on market mood. Indeed, the sentiment-linked currency tracked S&P 500 futures upward. The British Pound continued to fall for a second day despite last week’s Brexit breakthrough. The move might reflect profit-taking before the next stage of the torturous UK/EU divorce proceedings gets underway.
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IG Client Sentiment Index Chart of the Day: NZD/USD
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Retail trader data shows 59.0% of traders are net-long NZD/USD, with the ratio of traders long to short at 1.44 to 1. In fact, traders have remained net-long since Oct 18 when NZD/USD traded near 0.70693; price has moved 2.2% lower since then. The number of traders net-long is 10.8% lower than yesterday and 11.4% lower from last week, while the number of traders net-short is 41.7% higher than yesterday and 23.8% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current NZD/USD price trend may soon reverse higher despite the fact traders remain net-long.
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