NZDUSD: Kiwi Keeling Over

The fundamental picture for the Kiwi is beginning to look pretty bleak.

Disappointing data released overnight showed that NZ y/yCPI slumped from 1.6% to 1.0% whilst q/q CPI stayed in-line at 0.3% but underperformed expectations of a rise to 0.5%, both figures highlighting serious growth concerns for the Kiwi. Markets are now pushing out expectations of an RBNZ rate rise.

Having sold off over 1000 pips from summer highs, this recent signal of growing disinflationary pressure juxtaposed with a stronger figure out of the US is likely to see NZDUSD continue under-perform.

As confirmation of market participants lack of confidence in the beleaguered Kiwi, NZD’s non-commercial net short positions increased substantially from 100 contracts to 2,384 contracts, the most since July 2013, according to futures market, reflecting the funds outflow from the kiwi.

Technically, the H1 break of the trendline from recent lows in line with Order Flow Indicators having crossed to the downside, provided a great entry for initial shorts and should the Daily candle close through this trendline, further short positions can be initiated to target the NFP lows initially before further downside.

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The weekly picture is just as bleak with Daily Order Flow Indicators both firmly to the downside in line with On Balance Volume. Downside targets sit at 2012 lows of .7453 and the 2011 low of .7111

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