Bottom line: NZDUSD medium term structure remains bullish against 0.5460/70 lows. Bulls might be preparing to push higher towards 0.6450 levels at least, which is seen as immediate resistance, going forward.
Fundamental Outlook:
NZDUSD employment showed a surprising rise in the first quarter printing 0.7% against a forecast of -0.3% yesterday. This was unexpected since the country wide lock down due to the COVID-19 pandemic effect. NZDUSD rate continued lower and might have settled around 0.6000 yesterday. It remains to be seen how the exchange rate reacts to Reserve Bank of New Zealand monetary policy meeting on May 13. The bearish outlook for Global Indices would also weigh on the NZDUSD exchange rate.
USDJPY exchange rate hit 106.00 mark yesterday as the Japanese Yen strengthened with US indices heading lower. The US Job markets (over 21 million jobs lost in past 4 weeks), trade war fears between the US and China may add further pressure on the USDJPY rate, going ahead. The next levels to watch could be 105.00/20.
SPX500, along with Dow Jones continues to point lower, as expected and discussed earlier. The SPX500 closed -0.70%, while Dow Jones at -0.91% respectively yesterday. After having recorded over 30% rally between March 23 and April 2020, the SPX500, along with global indices are back under pressure. The effects of Fed stimulus packages seem to be fading as the world stares at a Global Recession induced by COVID-19, and US-China trade war fears ahead.
Technical Analysis:
NZDUSD remains in control of bulls until 0.6470 lows remain intact. Any corrective drop should be considered as an opportunity to initiate fresh long positions. NZDUSD has corrected lower towards 0.6000 mark as expected and discussed last week, and it should be looking to resume its rally towards the next resistance at 0.6450 levels respectively.
Structurally, NZDUSD has carved an impulse drop between 0.8842 and 0.5460 levels respectively, since 2011. Ideally, a corrective rally should unfold, which could retrace the entire drop and reach towards the fibonacci 0.618 levels around 0.7550 levels.
The first wave of the counter trend rally could reach up to fibonacci 0.382 retracement around 0.6700/50 levels. Also note that 0.6700/50 is major price resistance as well marked on the chart here. Bulls should remain poised to push higher towards 0.6700/50 levels before pulling back lower again.
Most traders might be willing to hold on to long positions taken earlier, also look to add further around 0.6000/10 mark. Protective stop loss would still go below 0.5460 and potential targets towards 0.6500 and 0.6750 respectively.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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