NZD/USD To Extend Gains On Strong New Zealand Wage Growth

Talking Points:

- NZD/USD to Extend Gains Strong New Zealand Wage Growth.

- USDOLLAR Risks Further Losses on Weak ISM Non-Manufacturing Survey.

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NZD/USD

Chart - Created Using FXCM Marketscope 2.0

• Despite the limited market reaction to the Global Dairy Trade auction, NZD/USD may mount a larger advance over the next 24-hours of trading should New Zealand’s Private Wages excluding Overtime are anticipated to increase 0.5% in the second-quarter following the 0.4% expansion during the first three-months of 2016.
• Even though the Reserve Bank of New Zealand (RBNZ) is widely anticipated to further embark on its easing cycle in 2016, the ongoing recovery in dairy prices accompanied by signs of stronger wage growth may encourage Governor Graeme Wheeler to buy more time at the next interest-rate decision on August 11 as ‘long-term inflation expectations are well-anchored at 2 percent.’
• Despite the risk for a head-and-shoulders top, the bullish break in the Relative Strength Index (RSI) may generate a larger advance in NZD/USD, with a closing price above 0.7210 (100% expansion) raising the risk for another run at 0.7330 (38.2% retracement) to 0.7340 (61.8% expansion).

• The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd flipped back net-short on July 28, with the ratio hitting an extreme reading during the previous month as it slipped to -2.58.
• The ratio currently sits at -1.55 as 39% of traders are long, with long positions 18.5% lower from the previous week, while open interest stands 4.6% higher against the monthly average.

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USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• The USDOLLAR weakens against all of its major counterparts, with the greenback at risk for a further decline as the mixed data prints coming out of the U.S. economy fail to foster expectations for a 2016 Fed rate-hike; may see the reserve currency face additional headwinds over the next 24-hours as the ISM Non-Manufacturing survey is anticipated to narrow to 56.0 in July form 56.5 the month prior.
• Despite the stickiness in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, the slack in Personal Income may encourage the Federal Open Market Committee (FOMC) to further delay its normalization cycle as the central bank continues to warn ‘market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.’
• The USDOLLAR is coming up against a near-term area of interest around 11,898 (50% retracement) to 11,914 (38.2% retracement), with a break/close below the Fibonacci overlap opening up the next downside target around 11,822 (23.6% retracement) to 11,843 (38.2% retracement).

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