Bottom line: NZDUSD medium term structure remains bullish against 0.5470 lows since March 2020. Bulls are looking determined to push through 0.6750/0.6800 resistance, in the short term. Thereafter a meaningful pullback can be expected.
Fundamental Outlook:
NZDUSD had reverses lower from its monthly peak at 0.6585 last week. It might reel under further pressure as GDP figures clocked in the negative today, at -0.2%. The NZDUSD exchange rate is 0.6445 as we write this article and could drop further toward 0.6340/50 levels.
USDJPY exchange rate had managed to gain over the last week and push towards 107.65 before giving up. The anti-risk Japanese Yen could be set to gain further over the coming days as risk sentiment continues to falter. Fear of a second wave of infecting continue to risk and may send Global Equity Markets lower, boosting the Japanese Yen further.
SPX500 had managed to peak around 3230 on June 09, 2020; only to reverse sharply lower. The indice had seen its worst single day drop (over -5.0%) on June 11, since March 23, 2020. A steep rise in COVID-19 infections across the US, China and other regions has sent Global Equity Markets coiling lower. Believe it or not, this might be seen as beginning of a much deeper sell off.
Technical Analysis:
NZDUSD remains in control of bulls as they set their next target towards 0.6750/0.6800 mark. Bulls have managed to carve a series of higher highs and higher lows since 0.5470 lows, and are very close to taking out resistance around 0.6800 before producing a meaningful retracement.
The RSI on the daily has stalled at 60 levels after reversing from 80 earlier. There might be yet another push above 0.6600 levels, while the RSI produces a bearish divergence. Also note several convergences are seen around 0.6800; fibonacci 0.382 retracement of entire drop between 0.8850 and 0.5470, the back side of broken line of support, which is now resistance.
NZDUSD might produce a meaningful retracement after bulls are successful in taking out the above resistance. Traders might be willing to hold long positions taken earlier, with protective stops at 0.5900 and projected target around 0.6750/0.6800 respectively.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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