No sooner had we broken below 77c the Greenback sell off, despite ‘okay’ employment figures, seeing the Kiwi fly safely above the 77 handle.
Nonfarm reaction is a little suspicious
The fact that USD Index has edged lower from employment data which I consider pretty good (in the grand scheme of things) to be a little bit suspicious. We generally require Nonfarm data to deviate away from consensus by a minimum of 60k to produce a more meaningful move, yet this NFP only missed the mark by 21k. Unemployment also fell to 5.8% whilst the participation rate was up – yet the Greenback sold off across the board. One could argue the market expected stronger data but we could also consider the fact that traders are offloading their positions at the highs, whilst they can.
CFTC data also reveals something interesting leading up to NFP. Large Traders added 18k short contracts whilst the bulls only added 10k contracts to bring the long / short ratio down to its lowest level since September 9th.
Whilst I do not think NFP is a trend changer, it could mark an interim top and for the USD Index to retrace deeper, adding support to NZD, AUD pairs.
Intraday momentum clearly favours the Kiwi bulls, however there is no shortage of resistance levels to consider with any further gains. We also find outself back withina 350-pip range the Kiwi was stuck for 27trading sessions.
So for now this remains a Dollar strenght issue (or lack of) and we shoud see NZDUSD remain within the corrective range until a Greenback returns to the bullish trend.
Over to RBNZ
Wednesday should shed some more clues to how much upside the Kiwi has when we have the Financial Stability Report from RBNZ, along with a speech from Governor Graeme Wheeler. The report itself is unlikely to add any sustainable moves to the Kiwi but we may have some more luck with Graeme Wheeler is he continues to jawbone the currency. If he fails to then this will probably add further upside to NZDUSD, but any reiteration to the “unjustified and unsustainable currency” should see NZDUSD capped below 0.785 resistance zone and remain within the lower range.
It will then be back in the Greenback’s side of the court to see if we can push back below 77c. Due to the trend being technically bearish, RBNZ wanting the Kiwi Dollar lower and Large Traders net short on Kiwi Dollar I suspect it is just a matter of when, not if, we can push below 77c.