NZD/USD Fails to Extend Near-Term Bullish Series Ahead of NFP Report

 

 

Talking Points:

GBP/USD Paves Larger Relief Rally Amid Easing Fears of ‘Hard Brexit.’

NZD/USD Fails to Extend Near-Term Bullish Series Ahead of NFP Report.

DailyFX

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

GBP/USD

1.2587

1.2696

1.2505

81

191

GBP/USD Daily

GBP/USD Daily Chart

Chart – Created Using Trading View

  • GBP/USD breaks out of a narrow range and looks poised for a larger relief rally as Eurogroup President Jeroen Dijsselbloem talks down the risk of a ‘hard Brexit’ and assures that the two regions can draw up new agreements to allow the U.K. ‘to enter the internal market and to allow trade to continue;’ the pound-dollar may extend the advance from earlier this week on a close above the Fibonacci overlap around 1.2630 (38.2% expansion) to 1.2680 (50% retracement) especially as the Relative Strength Index (RSI) threatens the bearish formation carried over from May.
  • The ongoing pickup in risk sentiment accompanied by the agreement within the Organization of Petroleum Exporting Countries (OPEC) to cut oil production may push Bank of England (BoE) officials to adopt a more hawkish tone at the last-2016 interest rate decision on December 15, and Governor Mark Carney and Co. may show a greater willingness to gradually move away from its easing-cycle as central bank officials warn ‘there are limits to the extent to which above-target inflation can be tolerated.’
  • Another failed attempt to close above 1.2630 (38.2% expansion) to 1.2680 (50% retracement) may pull GBP/USD back towards channel support, with near-term support 1.2370 (50% expansion), but a further advance in the exchange rate may spur a move back towards former-support around 1.2920 (100% expansion) to 1.2950 (23.6% expansion).

Currency

Last

High

Low

Daily Change (pip)

 

 

Daily Range (pip)

NZD/USD

0.7062

0.7105

0.7044

21

61

NZD/USD Daily

NZD/USD Daily Chart

Chart – Created Using Trading View

  • Failure to preserve the recent series of higher highs & lows undermines the near-term rebound in NZD/USD, with the pair at risk of facing further losses over the next 24-hours of trade as market attention turns to the highlight anticipated U.S. Non-Farm Payrolls (NFP) report, which is anticipated to show another 175K expansion in November; may see the kiwi-dollar continue to pare the rebound from 0.6971 should the labor report highlight an improved outlook for growth and inflation.
  • A broader shift in market behavior appears to be taking shape as NZD/USD breaks down from the upward trend carried over from earlier this year, but fresh remarks from the Reserve Bank of New Zealand (RBNZ) may limit the downside risk for the exchange rate as Governor Graeme Wheeler endorses a wait-and-see approach going into 2017; nevertheless, the central bank may keep the door open to further embark on its easing-cycle while appearing before Parliament’s Finance and Expenditure Committee on December 7 as the RBNZ warns ‘numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.
  • With the broader outlook for NZD/USD tilted to the downside, a break/close back below 0.7040 (50% retracement) may ultimately spur a more meaningful run at the next downside target around 0.6950 (38.2% retracement), which lines up with the July low (0.6951).

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DailyFX SSI

  • The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long GBP/USD even after the British Pound ‘flash crash,’ with FX sentiment registering a 2016-extreme reading of +5.97 during the previous month, while traders have flipped net-long NZD/USD just ahead of December.
  • GBP/USD SSI sits at +1.17 as 54% of traders are long, with short positions 26.5% higher from the previous week even as open interest stands 3.1% below the monthly average.
  • NZD/USD SSI sits at +1.04 as 51% of traders are now long, with long positions 25.3% lower from the previous week as open interest stands 4.2% below the monthly average.
  • Even though the retail crowd remains net-long GBP/USD, sentiment continues to narrow from the 2016-extreme following the near-term advance in the exchange rate, with the SSI ratio marking the lowest reading since September.

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— Written by David Song, Currency Analyst

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

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