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Asia AM Digest: NZ Dollar Defends Gains as Other Majors Give Ground

Asia AM Digest: NZ Dollar Defends Gains as Other Majors Give Ground

Research, Research Team

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The US Dollar corrected higher Friday having been badly battered following the FOMC monetary policy announcement. The New Zealand Dollar managed to hold its own against its US counterpart while scoring impressive gains versus the rest of the G10 FX field, seemingly still reveling in “fade the Fed” dynamics. The British Pound turned sharply lower in a move that might have marked pre-positioning before the European Commission opines this week on prospects for a post-Brexit transition period smoothing the UK/EU divorce process.

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IG Client Sentiment Index Chart of the Day: NZD/USD

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Retail trader data shows 57.1% of traders are net-long NZD/USD, with the ratio of traders long to short at 1.33 to 1. In fact, traders have remained net-long since Oct 18 when NZD/USD traded near 0.70693; price has moved 0.8% lower since then. The percentage of traders net-long is now its lowest since Oct 11 when NZD/USD traded near 0.70946. The number of traders net-long is 2.9% lower than yesterday and 20.7% lower from last week, while the number of traders net-short is 5.4% higher than yesterday and 45.2% 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.

Five Things Traders are Reading

  1. Weekly Trading Forecast: How Will Markets Position to End 2017? by DailyFX Research Team
  2. EUR/USD Weekly Technical Analysis: Risk of a Euro Sell-off Rising by Paul Robinson, Market Analyst
  3. Foundations of Technical Analysis: FOMC Trade Setups – 2018 Outlook by Michael Boutros, Currency Strategist
  4. GBP Risks Further Losses as UK & EU Gear Up for Phase 2 of Brexit Deal by David Song, Currency Analyst
  5. Tug-of-War Between Euro and USD as Focus Shifts Towards 2018 by James Stanley, Currency Strategist

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