Quiet European forex session sees G10 currency pairs trading mostly within ±0.1% of opening levels

The FX market was becalmed Thursday morning in Europe, with the G10 currency pairs trading mostly within ±0.1% of their opening levels.

The main exception was NZD, which fell against the dollar. I can only assume that the move was due to profit-taking after Reserve Bank of New Zealand’s rate hike overnight and the subsequent move up in NZD, which was not that strong. Some investors may have reasoned that the modest reaction to the RBNZ’s hawkish statement suggested that long NZD is a crowded trade and it’s better to sell (a “buy the rumor, sell the fact” reaction). Looking at the recent Commitment of Traders report, speculators were long some 19.8k NZD contracts, which is relatively high – it’s the 89th percentile over the last five years, meaning speculators held more long contracts only 11% of the time. My view, which I detailed in the morning comment, remains that the NZD should trend higher. Investors who are considering getting in might want to look at this dip as a buying opportunity.

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