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.
NZD/USD is one currency pair I’m watching closely at the moment, as the pair’s recent rally continues to unravel.
Remember the kiwi was one of the strongest-performing currencies earlier in the year when the RBNZ went through its rate hike cycle. However, the RBNZ has grown increasingly concerned about strength in the NZD impacting growth, and there’s even some talk about the RBNZ intervening.
Trade balance numbers out of NZ this morning showed a wider-than-predicted trade deficit for July of $692 million, versus -$475 million expected. There was a pretty sharp drop in exports, which can be attributed to the impact of a high NZD and deteriorating dairy prices. This has seen the pair drop to its lowest since February, with momentum firmly to the downside.
NZD/USD looking bearish
From a price-action perspective, NZD/USD has breached the 61.8% retracement of the rise from February lows at 0.8052 to July highs at 0.8838. This leaves the pair particularly vulnerable and, should the round number support at 0.8300 be broken as well, these losses could be extended. Perhaps a concern for the bears at the moment is the fact the pair is in oversold territory. This could discourage fresh selling in the near future.