NZD Tumbles On Fonterra News, Services Data In Focus

New Zealand dollar opens the week sharply lower as weighed now by news that the major dairy exporter, Fonterra, found a rare botulism bacteria in some of its products. The discovery triggered ban from China and Russia on imports from Fonterra. The country sell around NZD 13.5b of dairy products around the world. And, China is the largest market, buying as much as NZD 3.2b. Analysts noted that the negative news will have a negative impact of Kiwi and NZ markets in the short run.

Technically, NZD/USD's recovery in July was limited by 55 weeks EMA, and it followed other commodity currencies to drop sharply lower later week. This week's gap down affirmed bearish momentum and the whole fall from March's high of 0.8675 is likely resuming. Near term focus in on June low of 0.7682. Break there will likely pave the way to 0.7370 and below in the next few weeks.
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Australia dollar was also weighed down by the Fonterra news as some potentially contaminated ingredient was imported fro NZ for further processing, which could then be shipped on from Australia. In addition, retail sales released today saw 0% growth, missing expectation of 0.4%. RBA rate decision will be a major focus this week and markets are pricing over 90% chance of another 25bps cut to fresh record low of 2.50% on Tuesday.

As for today, services data will be a major focus. Eurozone will release PMI services final in July, Sentix investor confidence and retail sales. UK will release PMI services which is expected to improve further to 57.3 in July. US ISM services is expected to rose to 53.0 in July.

Latest CFTC data showed that on July 30, positives were generally unchanged comparing to the prior week, except that there was some improvements in Euro and further deterioration in Aussie positions. Euro net shorts dropped for the third consecutive week to -8.5k, from -27.9k. Yen net shorts dropped to -82.1k. Sterling net short was relatively unchanged at -49.5k. Australian dollar net shorts rose to new 2013 high at -72.6k. Canadian dollar net shorts dropped slightly to -11.4k.