NZD/USD Tests Former Support Ahead Of Federal Reserve Minutes

NZD/USD attempts to retrace the sharp decline from the previous month after defending the February low (0.6943), with the RSI highlighting a similar dynamic as the indicator breaks out of a downward trend following the failed attempt to push into oversold territory.

However, the broader outlook remains mired by a head-and-shoulders formation as NZD/USD snaps the yearly opening range in March, and it remains to be seen if the Federal Open Market Committee (FOMC) Minutes will influence the exchange rate amid the limited market reaction to the US Non-Farm Payrolls (NFP) report.

Image of DailyFX economic calendar for US

In turn, the transcript of the Fed’s March meeting may keep the key reversal pattern in play even though the central bank stays on track to “increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month,” and the rebound from the March low (0.6943) may continue to coincide with the pullback in longer-dated US Treasury yields as Chairman Jerome Powell and Co. carry out an outcome based approach for monetary policy.

In turn, the decline from the February high (0.7465) may turn out to be a change in NZD/USD behavior if former support now acts as resistance, but the recent flip in retail sentiment has largely dissipated as open interest narrows 8.34% from the previous week.

Image of IG Client Sentiment for NZD/USD rate

The IG Client Sentiment Report shows 49.57% of traders are currently net-long NZD/USD, with the ratio of traders short to long-standing at 1.02 to 1.

The number of traders net-long is 3.65% lower than yesterday and 14.46% lower from last week, while the number of traders net-short is 6.08% higher than yesterday and 1.41% lower from last week. Retail traders are now net-short NZD/USD as the IG Client Sentiment index stood at 57.22% last week, with the decline in net-long interest materializing as the exchange rate struggles to extend the series of higher highs and lows from the start of the month.

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