New Zealand Dollar: NZD/USD (NZD=X) consolidates above 0.64

New Zealand Dollar: NZD/USD (NZD=X) consolidates above 0.64

New Zealand Dollar: NZD/USD (NZD=X) consolidates above 0.64

The NZD rose to its highest level since mid-August, at 0.6457, before closing the week around 0.6430. The NZD was up 0.2% on Friday, bringing its weekly gain to 1.2%. The broad-based weakness in the USD and the market’s paring back of OCR rate cut expectations combined to push the NZD to the top of its recent trading range last week.

CFTC data released over the weekend showed speculators remained heavily short the NZD as of last Tuesday (with a notional equivalent value of around US$2.6b), even as they cut their overall net long USD position. The NZD is looking very cheap on our short term model, given the lack of response to stronger fundamental factors through October, and combined with this heavy short positioning, there is the risk of a ‘short squeeze’ and break above the top of the recent range in the near-term.

NZ rates followed global moves on Friday, with rates falling and the curve flattening. The front-end of the curve remained sticky with the market having recently grown less convicted about the likelihood of a November rate cut.

The 2 year swap was down 1bp but, at 1.02%, it remains near the top of its recent trading range. There was little reaction to the ANZ consumer confidence index, which rebounded in October to near its long-run average. Rates should rebound when the market opens this morning.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 0.65.

The projected lower bound is: 0.64.

The projected closing price is: 0.64.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 80.5158. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 63.48. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 30 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 113.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 22 period(s) ago.

Rex Takasugi – TD Profile

FOREX NZD= closed up 0.001 at 0.644. Volume was 98% below average (consolidating) and Bollinger Bands were 14% narrower than normal.

Open     High      Low     Close     Volume___
0.644 0.644 0.642 0.644 508
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 0.64 0.63 0.66
Volatility: 7 8 9
Volume: 26,954 30,661 36,679

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX NZD= is currently 2.3% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of NZD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on NZD= and have had this outlook for the last 16 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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