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NZDUSD Commitment Of Trader Analysis

Have you heard of the Commitment Of Trader Reports?

Do you use them in your trading?

These reports often help traders find key turning points in the markets.

In this video we analyse the New Zealand Dollar reports to identify the potential reversal of the trend.

Watch the video to learn more…

Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.

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In this video, we’re going to talk about NZD/USD as the price continues to rise. But is the price ready to drop?

Now I’ve got some commitment of trader analysis behind the strength and weakness chart. But, what’s quite noticeable on the strength and weakness chart at the moment is the fact that we haven’t really moved anywhere on the price.

What we typically look for when we’re looking for the market to reverse – when we looked at Aussie last week – was the fact that the price was in those reversal areas. So, we can see Aussie was in that plus-5 area where we said: “Maybe it’s time to start looking for some Aussie sells”, and that’s when we saw the markets or the Aussie changes in cycles on a few daily charts. We can see this week that the AU Dollar has lost some value. So, we’re expecting that to follow through this week.

However, Kiwi has remained relatively strong, and it hasn’t actually budged above this area of the plus four for a while now. And we’re expecting maybe a little bit more upside out of the market in order to then look for those shorting opportunities. But what’s interested me is the commitment of trader analysis. Now, this is very, very basic data in front of me. But, what’s interesting about this are the areas where the market has peaked before.

So, we can see most recently in 2020, we saw the market drop into this area, here, which was the start of 2020 where we saw that drop in price, and we can see that the short contracts from the dealers which is this green line, or the commercials as I like to refer to them. Essentially, they are increasing their short contracts as price rallies. So, you can see this rally into these previous structure highs, here. What the commercials do is that they add short contracts on as the price rallies, then they get to an area where the markets have been at an extreme before.

If I look left, the market also peaked in this area before we can see the previous structure on the weekly analysis, up here.. The market then drops from that area as well.

Typically, what we do is to look for the market to be at an extreme in terms of contracts, which we are getting now, in order to look for shorts. But, what’s interesting is the fact that the price is actually trading below or the dealer’s line is below the previous peaks in the market since 2018, where we have these lows, just through here.

So, what we may actually be seeing from Kiwi is that the market isn’t at the extreme at the moment. And we’re waiting for it to maybe reach these prices, up here, to look for that play of the short contracts and see the reversal in the trend.

Now, let’s take a look at this peak back in April 2018, which we can relate to on the chart. If I move out the way here and look at 2018, we can see around May and April is this block, through here.

What we could be expecting from NZD/USD at the moment is the fact that it hasn’t actually finished that move just yet. We may actually be witnessing a little bit of a slight rejection before seeing a rally up into around that 7160 -7200 area where we then may see the reversal.

We also have to remember that the US Dollar seasonal report suggests that the market is bearish until the end of the year, which could help Kiwi prices move higher.

So, what I’m actually expecting is what we typically see seasonally, as well as out of NZD/USD in particular, as we get to the start of the new year is that the market tends to move to the downside.

What I’m expecting is a bit of a rally towards the end of the year. We hit this block, here, where the market has found extremes on short contracts on the commitment of trade reports and then see a drop from their back down into previous supporting points from a weekly perspective. The trend might not be over just yet. We were watching these four-hour timeframes suggesting that you should be keen on the trend changes.

At the moment, we don’t have any changes in trend because the market actually created this low, here. We rallied, we’ve retested it once, we broke out of it, but then we had this false breakout pattern on Kiwi. What we typically look for is two closes below the low but we didn’t get that. So, the markets give us a false breakout. We could now see this market rally to the upside until the end of the year, then we could see those short contracts coming into play on the commercials.

So, keep an eye on your Kiwi. It is at a point where we should start taking notice of. Is it going to rally back up into this weekly block, up here? If it does, this could be a great area to short going into the new year.

Thanks for watching this video update and I’ll speak to you soon.

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Blueberry Markets is not a financial adviser, and does not issue advice, recommendations, or opinion in relation to acquiring, holding or disposing of a margined transaction. We provide general advice only and accordingly you should consider how appropriate the advice (if any) is to your objectives, financial situation and needs before acting on the advice.