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Forex Flash: Supportive NZD fundamentals haven’t changed – BNZ

FXstreet.com (Barcelona) - The Kiwi was able to finish higher for the first time in 7 days. After recent declines of just over 350 pips in a very short time, some analysts are commenting the recent decline isn’t all that surprising given recent market positioning, and a constructive view can still be taken going forward.

According to analysts at BNZ, “The NZD/USD has been a casualty of this broad USD rally, sliding from 0.8550 to recent lows around 0.8200. Notably, this slide has been gratefully received by the local export community as an opportunity to top-up hedging requirements. Our net flows for last week were in the 90th percentile, with heavy net buying evident across all the major NZD pairs.”

They went on to add, “A near-term pullback was already part of our NZD view. In particular, we have frequently highlighted the NZD downside risks associated with the ‘extreme’ positioning of the speculative community. According to CFTC data, net long positions were built up to the highest level on record through April. With speculative selling responsible for much of the recent NZD/USD decline, we have no doubt that the next batch of data (released Monday) will show spec positioning has been slashed back to more balanced levels. Selling from this sector of the market is therefore unlikely to continue at the same aggressive pace as the past week or so.”

On a final note they commented, “Recent NZ developments have only served to reinforce the positive growth and interest rate differentials underpinning the NZD. Importantly, the Q1 HLFS revealed the labour market is finally catching up to the general improvement in broader NZ economic indicators.”

Forex: EUR/AUD set for consolidation before next leg up?

The EUR/AUD finished the session down 40 pips at 1.3023. Some analysts believe recent weakness in the Australia Wage Index data may be a sign of further RBA Cuts to come. This would obviously be a positive factor for the pair going forward and may be worth monitoring. Furthermore, market participants may want to keep an eye on the upcoming European CPI print which will be due out at 9:00GMT.
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