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James Hyerczyk

The New Zealand Dollar is under pressure on Tuesday as trading intensifies after Monday’s U.S. holiday. The price action indicates that investors are already pricing in future rate cuts by the Reserve Bank of New Zealand (RBNZ), perhaps as early as its next meeting on September 24. Traders are also likely pricing in a dovish statement from the Reserve Bank of Australia (RBA) later in today’s session.

At 03:34 GMT, the NZD/USD is trading .6275, down 0.0033 or -0.52%.

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Also from Bloomberg, “Hedge funds are ramping up their short bets against the New Zealand Dollar. Net short speculative positions against the kiwi rose to their highest since November, according to the latest Commodity Futures Trading Commission (CFTC) data.”


Daily Technical Analysis

The main trend is down according to the daily swing chart. The current prolonged move down began with the last main top at .6791 on July 19. Over the past week, the selling pressure strengthened when traders took out .6378, the low put in after the surprise 50-basis point rate cut on August 7 and the January 20, 2016 main bottom at .6346.

The NZD/USD is in no position to change the main trend to up, but due to the prolonged move down in terms of price and time, it remains inside the window of time for a closing price reversal bottom. This chart pattern won’t change the trend to up, but it could signal that the selling pressure is easing.

The minor trend is also down. The last minor top at .6588 was formed on August 6, the last session before the RBNZ rate cut.


Daily Technical Forecast

Based on the early price action, the direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to Monday’s close at .6308.

Bearish Scenario

A sustained move under .6308 will indicate the presence of sellers. The next major downside target is the August 24, 2015 main bottom at .6207.

Bullish Scenario

After making another lower-low, overcoming .6308 will put the NZD/USD in a position to post a potentially bullish closing price reversal bottom. This could trigger an intraday short-covering rally with the January 20, 2016 main bottom at .6346 the next potential upside target. Overcoming this level will indicate the short-covering is getting stronger.

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