Analys från DailyFX
Traders Increase Bullish Kiwi Bets to Two-Year High; US Retail Sales Today
Talking Points
– Traders most bullish on New Zealand Dollar since August 2011.
– Another strong print related to infrastructure cements British Pound growth optimism.
– US Dollar looks to rebound with Advance Retail Sales (AUG) due before stocks open.
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INTRADAY PERFORMANCE UPDATE: 09:40 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.03% (-0.64%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The New Zealand Dollar has been a leader in the recent swing higher in risk sentiment, and with traders becoming more bullish amid a shift in central bank policy, the carry currency looks poised to outperform going forward.
On Wednesday, the Reserve Bank of New Zealand suggested that it would hike its main interest rate in 2014, a clear sign that economic growth has simply become too fast-paced and the benefits of looser monetary policy – a weaker currency that would help exporters’ sell their goods to foreign consumers – no longer keeping rates at their post-2008 lows.
In fact, a look at the Credit Suisse Overnight Index Swaps shows that traders are now pricing in +97.0-bps into the New Zealand Dollar over the next 12-months. This is the most bullish bet since the first week of August 2011, before the US lost its ‘AAA’ rating with Standard Poor’s, and before the NZDUSD plummeted from an all-time of $0.8843 on August 1 to as low as 0.7966 on August 9 (-9.92% in seven trading days).
At this point in time, near-term weakness seen in the New Zealand Dollar is likely to have two causes: exogenous anxiety due to emerging market growth concerns; and technical selling as profit is taken amid overbought conditions. Today, amid key US economic data – the August Advance Retail Sales report – there is a chance for a strong reaction at a critical juncture for the NZDUSD (see the chart below).
NZDUSD 5-minute Chart: September 13, 2013 Intraday
Taking a look at European credit, slightly weak bonds have emerged, though peripheral countries remain subdued. The Italian 2-year note yield has decreased to 2.019% (-0.4-bps) while the Spanish 2-year note yield has increased to 1.692% (+0.8-bps). Conversely, the Italian 10-year note yield has increased to 4.533% (+0.9-bps) while the Spanish 10-year note yield has decreased to 4.438% (-1.4-bps); higher yields imply lower prices.
Read more: Aussie Firms on Election Outcome – Rally Unjustified Given Economic Pitfalls
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
TECHNICAL ANALYSIS – CHART OF THE DAY
NZDUSD Daily Chart: January 2013 to Present
Charts Created using Marketscope – prepared by Christopher Vecchio
– The NZDUSD is on the verge of initiating a Bullish Double Bottom pattern on a weekly close above $0.8160/65.
– The 480-pip range has guided price between 0.7680/85 and 0.8160/65 since mid-May.
– The measured move calls for a rally into 0.8640/45, just short of the April swing high 0.8677; it would be logical to take profit near such a significant level of resistance (yearly high).
– On a bullish break, 0.8360 (mid-April support) is an interim target.
– Fundamentally, the US Advance Retail Sales (AUG) report poses a threat; a beat of the +0.4% m/m print could provoke a near-term setback in price; the pair is overbought on the H1 and H4 timeframes per RSI (21) and Slow Stochastics (5,3,3).
– A weak US sales report could provoke a break higher; confirmed above 0.8200.
– Overall, looking to buy dips in NZDUSD.
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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