Kiwi slumps on GDP shocker

While the Fed meeting grabbed most headlines, the resulting move in the greenback has been relatively subdued with mild weakness across the board.

Source: Bloomberg

However, FX traders were soon pinned on the NZD, which was on the move early in Asian trade following another round of concerning data. This time it was the GDP print which came in well below estimates. Q1 GDP came in at just 0.2% q/q (versus 0.6% expected) while for y/y it came in at 2.6% (versus 3.1% expected).

Given the RBNZ recently cut rates and this was accompanied by dovish commentary, these readings will see expectations of further rate cuts ramp up. The RBNZ has shown a willingness to respond quickly to signs of economic shift time and time again and this will play on traders in the near term.

AUD/NZD extended gains in response, with the pair trading to its highest level since November last year. Just a couple of months ago the pair was trading near parity but has managed to nudge through $1.1200 today.

The next key level will be in the $1.1300 region, which is where highs from October and November last year kick in. This region capped any further gains and will be on traders’ radars in the near term.

I feel traders should consider buying the dips. However, the price action is in overbought territory at the moment with an RSI of 78 and as a result I wouldn’t suggest chasing the price action higher. Moves back into $1.1100 are likely to present good buying opportunities.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.