Funds turn bullish on worst-performing New Zealand dollar

Bloomberg

These are troubling times for the New Zealand dollar but a whiff of optimism is in the air.
The kiwi has been the worst-performing major currency over the past month, tumbling 3.6 percent, after the central bank said the next policy move was likely to be an interest-rate cut. Disappointing first-quarter inflation numbers helped speed its decline.
The double whammy helped push the kiwi to within a whisper of January’s flash-crash low of 65.75 US cents in risk-off trading. Momentum indicators such as moving average divergence-convergence and slow stochastics remain in bearish territory.
Amid all this pessimism, one part of the market has turned positive.
Leveraged funds have become bullish on the kiwi for the first time since the start of January, according to data released by the Commodity Futures Trading Commission. They held a net long position of 1,845 contracts, compared with a net short position of 25,123 contracts as recently as August.
Positives for the kiwi can be found in its reduced valuation following recent declines, and easing US-China trade tensions that are improving the outlook for risk currencies.
The next big test will be New Zealand’s first-quarter job data due this week.
Employment growth is expected to quicken to 0.5 percent, from 0.1 percent in the previous three months, while private wages are also predicted to increase 0.5 percent, according to a Bloomberg survey of economists before the numbers are published.
The labour data has taken on added significance since the government passed reforms last year giving the Reserve Bank of New Zealand a dual mandate to include employment in addition to price stability in determining its monetary policy.
There is still plenty of evidence to back the bear case. Swap markets are pricing in a 65 percent chance the central bank will cut rates at its May 8 meeting, compared with little to no odds of a move at that gathering in calculations made in March.