NZD/USD at Risk for Further Losses on Growing Bets for RBNZ Rate Cut

Talking Points:

- NZD/USD Retail Crowd Remains Heavily Net-Long Even as Bearish Formation Remains in Play.

- AUD/USD Outlook Mired as IMF Calls for Dovish RBA Policy Stance.

- USDOLLAR Rebound to Face Triangle/Wedge Formation From April; Core PCE in Focus.

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NZD/USD

Chart - Created Using FXCM Marketscope 2.0

• Despite the near-term bounce in NZD/USD, the pair remains at risk for a further decline as price & RSI retain the bearish trend carried over from back in April; technical outlook still favors the approach to sell-bounces in kiwi-dollar.
• The New Zealand dollar remains at risk of facing further headwinds ahead of the Reserve Bank of New Zealand’s July 22 interest rate decision should the Trade Balance report heighten bets a back-to-back rate cut.
• Nevertheless, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long NZD/USD since May 19, with the ratio holding near extremes as it sits to +3.12.

AUD/USD

• AUD/USD may continue to give back the advance from earlier this month following the failed attempt to push back above former support around 0.7820 (38.2% retracement) to 0.7860 (61.8% expansion).
• As the International Monetary Fund (IMF) argues the Reserve Bank of Australia (RBA) should take a more dovish stance for monetary policy, may see the aussie come under increased pressure should Governor Glenn Stevens show a greater willingness to implement lower borrowing-costs while toughening the verbal intervention on the local currency.
• Need a break/close below key support around 0.7570 (50% expansion) to 0.7590 (100% expansion) to see a resumption of the long-term bearish trend.

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USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• Despite the limited market reaction to the final 1Q GDP report, the Dow Jones-FXCM U.S. Dollar may continue to retrace the decline from earlier this month as price & RSI breaks out of the bearish formation.
• Beyond market forecasts for a pickup in Personal Income, will keep a close eye on the core Personal Consumption Expenditure (PCE) as the Fed’s preferred gauge is expected to hold steady at an annualized 1.2% for the second straight month- the slowest pace of growth since February 2014.
• Will keep a close eye on 11,898 (50% retracement) to 11,901 (78.6% expansion), with a close above the key region likely to the next topside targets around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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