Market sentiment analysis:
- Market confidence has dropped a little but the major themes of stronger US stocks and a firmer US Dollar[1] will likely re-emerge.
- In the meantime, IG client sentiment data are sending out a bearish signal for NZD/USD[2] ahead of another expected interest rate increase in New Zealand tomorrow.
Trader confidence remains high
Trader confidence is still lofty in the markets and that should ensure that the major themes of stronger US stock indexes and a firmer US Dollar reassert themselves after a pause for breath. As the EUR/USD[3] chart below shows, the pair is modestly higher Tuesday but the downward trend remains intact, with the USD[4] helped by the re-nomination of Jay Powell as Fed chairman.
EUR/USD Price Chart, Daily Timeframe (May 20 – November 23, 2021)
Chart by IG (You can click on it for a larger image)
How to Trade Gold: Top Gold Trading Strategies and Tips[5]
Bearish NZD/USD
Turning to the IG client positioning data, the numbers are currently sending out a bearish signal for NZD[6]/USD even though the Reserve Bank of New Zealand is widely expected to follow up its October interest rate increase with another 25-basis-point raise at its meeting Wednesday.
The retail trader data show 54.91% of traders are net-long, with the ratio of traders long to short at 1.22 to 1. The number of traders net-long is 1.49% lower than yesterday but 30.95% higher than last week, while the number of traders net-short is 6.87% lower than yesterday and 23.88% lower than last week.
Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD may continue to fall. Traders are further net-long
