NZD Breaks Out; Outlook Mired by Weak Wages, Bets for RBNZ Rate-Cut

Talking Points:

NZD Breaks Out on Strong Employment; Outlook Mired by Weak Wages, Bets for RBNZ Rate-Cut.

USD/CAD Vulnerable to Further Losses on Another 7 to 3 FOMC Split.



NZD/USD Daily Chart

Chart – Created Using Trading View

  • NZD/USD looks staid for a incomparable liberation forward of a Reserve Bank of New Zealand’s (RBNZ) final 2016 seductiveness rate preference on Nov 10 as a span breaks out of a downward trend carried over from September; unsuccessful try to tighten subsequent 0.7040 (50% retracement) might pave a approach for a longer-term array of aloft highs lows generally as a kiwi-dollar preserves a ceiling trend from progressing this year.
  • Despite a 1.4% enlargement in New Zealand Employment, a ongoing debility in domicile gain might inspire a RBNZ to broach another rate-cut forward of 2017 as Governor Graeme Wheeler and Co. advise ‘current projections and assumptions prove that serve process easing will be compulsory to safeguard that destiny acceleration settles nearby a center of a aim range.’
  • Will keep a tighten eye on a topside targets forward of a RBNZ meeting, with a tighten above 0.7280 (50% expansion) opening adult a subsequent segment of seductiveness entrance in around 0.7350 (61.8% expansion) followed by a Fibonacci overlie around 0.7460 (78.6% expansion) to 0.7530 (78.6% retracement).


USD/CAD Daily Chart

Chart – Created Using Trading View

  • Broader opinion for USD/CAD stays constructive as a sell rate retains a bullish arrangement carried over from a summer months, yet a span stands during risk for a near-term pullback as it comes adult opposite channel resistance; will keep a tighten eye on a Relative Strength Index (RSI) as a oscillator highlights identical energetic and appears to have done a unsuccessful run during overbought territory.
  • Even yet Bank of Canada (BoC) Governor Stephen Poloz validate a dovish opinion forward of a subsequent process assembly on Dec 7, another 7 to 3 separate within a Federal Open Market Committee (FOMC) might coax a near-term pullback in USD/CAD as it drags on interest-rate expectations.
  • Need a break/close above 1.3460 (61.8% retracement) to open adult a topside targets, yet a pierce behind subsequent a Fibonacci overlie around 1.3300 (61.8% expansion) to 1.3310 38.2% retracement) would lift a risk for a pierce behind towards a Oct low (1.3006).


  • The DailyFX Speculative Sentiment Index (SSI) shows a sell throng stays net-short NZD/USD given Oct 28 even as a span breaks out of a bearish formation, while traders have been net-short USD/CAD given Oct 20.
  • NZD/USD SSI sits during -1.92 as 34% of traders are long, with brief positions 21.0% aloft from a prior week even as open seductiveness stands 4.0% subsequent a monthly average.
  • USD/CAD SSI sits during -2.02 as 33% of traders are long, with brief positions 3.7% aloft from a prior week, while open seductiveness stands 11.6% above a monthly average.
  • Will keep tighten eye on NZD/USD positioning as a sell throng gets held on a wrong side; note a SSI ratio strike a 2016-extreme of -3.41 in September.

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— Written by David Song, Currency Analyst

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