Bottom line: NZDUSD medium term outlook remains bullish until prices stay above 0.5470 levels. Bulls are expected to remain poised to target above 0.6450 levels until prices stay above 0.5900 interim support.
Fundamental Outlook:
NZDUSD pushed lower yesterday as the Reserve Bank of New Zealand kept OCR unchanged at 0.25%. The New Zealand Dollar reversed lower from 0.6100 mark and could still come under pressure if drops below 0.5900, as RBNZ maintains a dovish tone for its monetary policy going forward. Though there are no indications of immediately adapting a negative interest rate policy, RBNZ would be required to step up measures for further stimulus.
SPX500 continued its sell off yesterday as the indice closed at 2820 levels, down by -1.75%. Its counterpart Dow Jones also followed in the red, closing lower by -2.17%. Fed Chair Jerome Powell had ruled out any possibility of a Negative Interest Rate Policy, which added fuel to the much expected drop since last several trading sessions. The effect of COVID-19 pandemic on the economy is going to be long-term, he added further.
USDJPY gained yesterday as US Equity Markets tumbled again after a negative interest rate policy was ruled out. Safe haven US Dollar and Japanese Yen remained beneficiaries as they gained across majors. The USDJPY is trading around 106.80 levels as we write this article and could be heading towards 105.00, going further.
Technical Analysis:
NZDUSD has been trading in a narrow range between 0.5900 and 0.6100/50 levels since mid-April 2020. A break above 0.6150 levels would open doors to rest 0.6450 resistance, and keep bulls into play. On the flip side, a break below the 0.5900 mark would be encouraging to bears.
NZDUSD might have carved a meaningful low around 0.5470 levels but we need to see a break above 0.6760 resistance to confirm a bullish reversal. Structurally, NZDUSD might be retracing its down trend between 0.8842 and 0.5470 respectively.
Traders might be preparing to cautiously initiate long positions around current price action (0.5980) with a protective stop below 0.5900 and projected targets above 0.6450 levels, going further.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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