- Break below multi month trend line
- MACD on the monthly chart shows Bearish divergence
- Technical analysis
The kiwi has been selling off for the last three months. We however found support at 0.7707 level which is last month’s low and the low of this year. Prices for the NZDUSD have corrected 300 pips to the upside which accounts for about 30% of the fall. Should we correct further up, this will be a signal of the weakness of the bears and we may see a full reversal take on. However fundamental factors are decisively against the weakening of the USD or the Strengthening of the NZD. The US economy is showing strong growth figures whilst the New Zealand is hurting from the fall in commodity prices. We can therefore take a reading that the fundamentals are giving us a bearish bias towards the NZDUSD pair.
The prices for NZDUSD have retraced just slightly above the 23.6% Fibonacci retracement level and then found significant rejection at 0.8034 which is last Tuesday’s high. From that peak we have fallen over 200 pips to the present levels at 0.783. We managed to break through the weakly pivot point at 0.7911 on Wednesday following the positive inflation rate report released from the US. Today during the open of London’s session, the market woke to some bullish correction and therefore our primary focus is to determine the dominant direction of the prices in the pair.
Major Support and resistance levels
Should the overall downtrend continue we should expect o find some buying pressures at the following support levels
- The first significant support level is the weekly S1 at 0.7823
- The next support is at 0.7734 which is the weekly S2
- The furthest support is the weekly S3 at 0.7632
- We should however keep an eye out for the yearly low at 0.7707 we expect a spike in volatility and potential whiplash at this level
- The closest resistance is 0.7866 which is the potential intersection with the 21, SMA
- The next resistance is the 0.7911 level which is the weekly pivot point
- The furthest resistance is the monthly pivot point at 0.7975
From the monthly chart, we get our first indication from the MACD which has a bearish divergence. The prices are generally moving up while the MACD is making lower highs. We should also notice that from the previous high in price, the Prices failed to make a higher high at 0.8835 compared with the previous high at 0.8841.
The 14 period moving average has fully crossed the candle stick and prices are now trading below it. Last month’s candle closed well below the moving average. All these bearish indications are consistent with each other showing that we should be anticipating the prices to slide lower.
The RSI, at a reading of 44.00 is indicating that we are at neutral conditions which essentially mean that the dominant downtrend can continue. The Stochastic on the other hand, is giving a reading of 9.56 which indicates oversold conditions, given the sensitivity of the stochastic and the minimal price correction taking place we can anticipate that a large scale correction will take a while to take shape.
A quick peak at the weekly, daily and four hour charts reveals that the 14 period moving average is trading well above the prices in all these timeframes. This indicates that the pair is likely to go lower in both the short term and longer term outlooks. The technical indicators align with the dominant fundamental outlook. Under these conditions a great approach is to short the pair below the yearly low.
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New Zealand dollar traded lower this past week after solid gains against the US dollar, but found support around and important area which means there is a chance of recovery in the near term.
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