Chart of the Day NZDUSD
NZDUSD - Probable Price Path
Overall risk sentiment remains supported over the weekend, with investors focusing on a potential vaccine and guidelines issued by President Trump outlining the conditions of reopening the American economy. FX Volatility continues to move lower within the Risk-Off zone, suggesting an ongoing easing of risk aversion. However, note that the FX response to this improvement in risk is actually more subdued than other asset classes. The DXY index has retraced approximately 38% of its peak-to-trough movement, compared to the 57% retracement in the S&P500. Note also that the negative correlation between DXY and S&P 500 is also reversing, the lead of equities on the FX market may be fading.
On the CFTC front, leveraged accounts continue to pull back their implied USD longs, while non-commercial accounts increased their implied USD shorts. Asset managers are effectively static in their overall positions. Overall, although the short term players continue to move against the USD, it is done only in a very tentative way, with shifts in overall positioning only marginal. This reflects the underlying uncertainty over USD directionality in the near-term.
In news over the weekend, House Speaker Pelosi and Treasury Secretary Mnuchin were optimistic about soon reaching a deal to top up funding for the loan programme for small businesses, for which the $300bn of funding previously allocated has already been exhausted. There is also talk of a $500bn fund for state and local governments to be in the next rescue package. Since Friday, data on COVID-19 continues to show a slowdown in the spread of the virus and number of deaths across much of Europe and the US, which will add to hope that lockdowns can soon come to an end. The New Zealand government announced a move to a less restrictive lockdown. The number of new cases has slowed to a trickle.
From a technical and trading perspective, NZDUSD is benefiting from a positive headline overnight and has been bid through the Asian and early European sessions, bulls will take encouragement from the defence of the weekly pivot. Focus now will be on a breach of .6060 setting up a move to test the next upside equality objective sighted at .6200 from here we may witness another corrective pullback before the next thrust to ultimately test .6450/80 which represents the 78.6% retracement of the crisi decline and the primary equality objective, this area will likely compete the first leg of a more sustained correction.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!