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NZDUSD Bearish Sentiment after RBNZ Rate Decision


Feb.08.2017

NZDUSD Bearish Sentiment after RBNZ Rate Decision

The RBNZ kept rates unchanged at 1.75% as expected on Wednesday, and the NZD sentiment quickly changed with the NZDUSD bearish sentiment continuing beginning of Asian session. Here is a quick IDDA approach to see if there are any solid opportunities to make some pips off NZDUSD bearish sentiment.

 

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1- Fundamental Points

RBNZ Rate Decision & Statement

Reserve Bank of New Zealand (RBNZ) official cash rate remained at 1.75% as analysts expected. Most economic data was stronger than the Bank expected when it released its last monetary policy statement in early November.  And, more critically, forward-looking business sentiment, profit, price, hiring and investment intentions are all pointing towards slightly stronger expansion.

Now you might ask: Then what made Mr. Kiwi to drop and what was behind NZDUSD bearish sentiment?

Here is what happened. The bank's governor Graeme Wheeler delivered a statement after the interest rate decision, and he played it cautiously.

The word "uncertainty" featured prominently in the statement. For example, he said:

"Monetary policy will remain accommodating for a considerable period.  Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly." 

 

 

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US Side

The January NFP report was a disappointment, especially the poor wage growth. While growth wasn’t really that horrible (it still printed an increase after all), the market was expecting a much faster rate of increase. Also, market participants weren't expecting December’s stellar readings to get revised lower. Furthermore, the downward revisions for the past readings for non-farm payrolls removed some shine from January’s impressive numbers.

As a result, many analysts believe a March rate hike could be off the table now. And knowing our gal-pal Janet Yellen, she is too cautious to take any surprising actions... What do you think?

 

Coming up... 

Thursday: On the economic calendar today we have the US Initial Jobless Claims during the New York session 1:30 PM GMT.

Later at 6:10 PM Fed's Evans Speaks on Economy and Policy in Chicago and traders will be looking for hints to trade the USD crosses.

 

Friday: On Friday We have key economic data out of the UK, US and Canada, starting with UK Industrial Production at 9:30 AM GMT.

Canada’s Unemployment Rate is released at 1:30 PM, expected to have remained unchanged at 6.9%.

Later U. of Michigan Confidence will be out of the US at 3 PM GMT to assesses consumer confidence regarding personal finances, business conditions and purchasing power based on hundreds of telephone surveys. The reading is expected to have ticked lower to 97.8 comparing to January’s reading.

 

2- Technical Points - NZDUSD Bearish Sentiment

 

Daily Chart: The NZD/USD pair opened below the 0.73 resistance on Thursday’s Sydney session. While the pair remains above the daily Ichimoku cloud, the doors may have opened for drops towards the 23% Fibonacci level at 0.7177.

You ask why?

Hint: it has to do with the 4-hour chart and the positioning of the pair and the 4-hour Ichimoku cloud.

 

 

 

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NZDUSD Bearish Sentiment - Daily Chart Technical Analysis NZDUSD Bearish Sentiment - Daily Chart Technical Analysis

 

 

3- Market Sentiment

Before the RBNZ rate statement, only 33% of retail traders in one of the US largest brokers were bullish on NZD/USD. However at the time of writing, the sentiment seems to have changed. This is creating a mixed bias on the pair. Now that Kiwis and traders in the Land Down Under have woken up, we could see the pair to get into over-sold zone and correct a little.  Stay tuned for more on NZDUSD bearish moves and market sentiment developments in our investing group.

 

NZDUSD Trading Strategy

Calculate your risk tolerance and use the levels mentioned below to create a strategy suitable for you. For further help, please visit our investing group.

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Here are Invest Diva's calculations for important approximate levels for NZD/USD to keep an eye on:

 

Support Levels Turning Point Resistance Levels
0.7115 0.7177 0.73
0.7177 0.7244 0.75

 

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