New Zealand Greenback Outlook:
- The New Zealand Greenback held important assist, sparked by hotter than anticipated inflation knowledge.
- NZD/JPY charges have rebounded from the uptrend from the March 2020 and January 2022 lows, whereas NZD/USD charges are off their yearly lows.
- Nonetheless, in keeping with the IG Consumer Sentiment Index, the New Zealand Greenback has a bullish bias within the near-term.
Scorching Inflation Helps Kiwi
With international fairness markets rallying in current days, the New Zealand Greenback has benefited as a excessive beta forex. However the extra essential growth this week was the recent 3Q’22 New Zealand inflation report, which confirmed worth pressures staying stubbornly elevated regardless of the Reserve Financial institution of New Zealand’s aggressive price hike efforts this yr. In flip, price hike odds have risen for the following few months, supporting the New Zealand Greenback: forward of the inflation report, 50-bps price hikes had been discounted at every of the following three RBNZ conferences; now, a 75-bps price hike is feasible in November.
NZD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to October 2022) (CHART 1)
Final week it was famous that “the pair is approaching an space of great technical assist: the September low at 80.56; the rising trendline from the March 2020 and January 2020 lows; the 23.6% Fibonacci retracement of the 2020 low/2020 excessive vary at 81.17; and the 61.8% Fibonacci retracement of the 2014 excessive/2020 low vary at 80.75…a drop by way of the assist space round 80.56/81.17 would recommend a extra vital dump is but to come back.” However this by no means transpired; as a substitute, assist held, with NZD/JPY charges gaining momentum because the early-October excessive was breached. Resistance lies forward close to 84.69, the 76.4% Fibonacci retracement of the 2014 excessive/2020 low vary, which has short-circuited rallies a number of instances all through this yr.
NZD/USD RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to October 2022) (CHART 2)
NZD/USD charges have rebounded off of yearly lows final week, organising a countertrend transfer. However the downtrend from the August and September swing highs stays in place, suggesting it’s too early to assert that the thrust decrease has been accomplished. The pair has discovered resistance at its day by day 21-EMA (one-month transferring common) having traded above its day by day 5-, 8-, and 13-EMAs. Day by day MACD is trending increased albeit under its sign line, whereas day by day Gradual Stochastics are advancing in the direction of their median line. Extra features in the direction of 0.5750/75 are attainable earlier than the August and September downtrend is reached.
IG Consumer Sentiment Index: NZD/USD RATE Forecast (October 18, 2022) (Chart 3)
NZD/USD: Retail dealer knowledge reveals 69.62% of merchants are net-long with the ratio of merchants lengthy to brief at 2.29 to 1. The variety of merchants net-long is 0.29% increased than yesterday and three.08% decrease from final week, whereas the variety of merchants net-short is 9.42% increased than yesterday and three.82% decrease from final week.
We usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests NZD/USD costs might proceed to fall.
Positioning is much less net-long than yesterday however extra net-long from final week. The mixture of present sentiment and up to date modifications provides us an extra blended NZD/USD buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist
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