Good morning forex traders and welcome to a rather sleepy forex dance floor with the exception of Ms. USA (AKA US dollar) which appears to remain wide awake and high up against her major counterparts, especially against the drowning Kiwi. As a result NZD/USD can be quoted as the pair who dropped the most on the forex dance floor on the last day of September.
3 Reasons Why Kiwi is Down
The main focus today is Kiwi (forex geek name for New Zealand dollar) who dived down his biggest three-day drop since 2013. Here are the three reasons why our beloved is dancing down against US dollar and why it could go further.
1- RBNZ’s Big Intervention
The Reserve Bank of New Zealand said its currency sales in August were the most in seven years. This is called intervention and market participants are now expecting more of it coming, therefore the plunge. The RBNZ’s foreign currency intervention capacity was NZ$9.56 billion in August, up from NZ$8.62 billion a month earlier, today’s data show.
2- Secret GDT Factor
There may be another secret factor that has led to strong down moves in Kiwi, and that could be declining Global Dairy Trade (GDT) price index. GDT shows the change in dairy prices based on the weighted average of 9 dairy products sold in New Zealand’s dairy auction. This is seen as a leading indicator of commodity price inflation and the country’s trade balance.
This release has drawn a lot of attention in the past few months, as declining dairy prices have started to weigh on New Zealand’s economic performance. Apart from weighing on export demand and revenues, lower dairy prices also result in a reduction of milk payouts to farmers and suppliers, which could hurt spending and investment in the sector later on.
The next release is scheduled on Thursday, with another negative reading likely to push Mr. Kiwi lower.
3- Hong Kong Unrest
In the other side of the world, but still close enough to affect the Aussie and New Zealand markets pro-democracy protesters in Hong Kong vowed to press ahead with demonstrations unless Hong Kong’s top official steps down. Thousands of people surrounding government offices after violent clashes paralyzed the city center.
The unrest hit the European shares and the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.2 percent, hitting its lowest level since mid-May.
Technical analysis
NZD/USD is dancing below the Ichimoku cloud and approaching a 15-month low and a bearish target of 0.7688. We could expect more drops towards the next key bearish level of 0.7501. A break above 0.8075 would change our outlook to bullish with 0.8267 as first alternative target.
Intraday Forex Technical Levels
EUR/USD 4-hour: Downtrend prevails.
Invest Diva Likes: Short positions below 1.2717 with targets at 1.2664 and 1.2565 in extension.
If Pair Goes Nuts: Above 1.2717 look for further upside towards 1.2771 and 1.2810.
What’s up on the Forex Dance Floor: The pair continues on an overall downtrend below the Ichimoku’s cloud but is now rebounding from the previous bearish target at 1.2664. The RSI is consolidating above the oversold zone. Also one of the largest international brokers says that 61% of traders are long the pair. Using this market sentiment index as a contrarian signal, the combination of the technicals and current sentiment gives a further bearish bias.
Supports and Resistances
1.2810
1.2771
1.2717 Pivot Point
1.2664
1.2565
GBP/USD 4-hour: Consolidating.
Invest Diva Likes: Short positions below 1.6227 with targets at 1.6171 and 1.6060 in extension.
If Pair Goes Nuts: Above 1.6279 look for further upside towards 1.6323 and 1.6398.
What’s up on the Forex Dance Floor: The pair is consolidating around the 1.6227 level below the Ichimoku’s cloud with the RSI flat above the oversold zone.
Supports and Resistances
1.6398
1.6323
1.6279
1.6227 Pivot Point
1.6171
1.6060
USD/JPY 4-hour: Consolidating.
Invest Diva Likes: Long positions above 109.17 with targets at 110 and 110.52 in extension.
If Pair Goes Nuts: Below 109.17 look for further downside towards 108.59 and 108.
What’s up on the Forex Dance Floor: The pair is on an overall uptrend above the Ichimoku’s cloud but currently is consolidating between the levels at 108.59 and the Ichimoku’s cloud and 109.17. The pair recently broke above the 109.17 level however seems not strong enough to reach the next bullish target yet. The RSI is heading towards the neutrality area.
Supports and Resistances
110.52
110
109.17 Pivot point
108.59
108
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