The New Zealand dollar was one of the few G10 currencies to lose ground against the greenback as speculators scaled down bullish bets. Indeed, according to data released by the CFTC last Friday, speculators trimmed long Kiwi positions significantly last week with net long positions falling to 12,546 contracts from 16,573 a week earlier - this corresponds to a decrease from 44% of total open interest to around 25%.
The last four weeks were rough for the New Zealand dollar as it gave up more than 6.5% against the buck to reach a multi-month low at $0.6903 on May 10th, amid widening interest differential and a cautious RBNZ. However, the debasement has stopped for now with NZD/USD climbing back to $0.6950.
On the downside, the currency pair is approaching a key technical support area at between $0.6869 (50% Fibonacci on March 2009- September 2011 rally) and $0.6781 (low from November 2017). Despite the solid debasement of the last few weeks, we think that sellers are not exhausted yet as speculators are still net long on Kiwi and may continue to unwind long positions.
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