Bottom line: NZDUSD medium term structure is still bullish against 0.5470 lows. Bulls seem to be targeting 0.6450 resistance as they rally after carving a higher low at 0.5920 levels last week. Intraday corrective drops remain possible, but NZDUSD should remain well supported above 0.5920 levels.
Fundamental Outlook:
NZDUSD managed to hit monthly highs at 0.6157 yesterday after Reserve Bank of New Zealand kept OCR unchanged to 0.25% in the monetary policy meet held last week. Though the RBNZ has ruled out possibilities of a Negative Interest Rates Policy in the near term, more stimulus would be required to overcome the COVID-19 effect on the economy. RBNZ is expected to maintain a dovish guidance over the next meet as well.
SPX500 had managed to print yet another monthly high around 2980 yesterday, before closing at 2972. The indice managed to close the day higher by over +1.5% after opening gap up. The optimism over a potential COVID-19 drug invention (though it is far from reach) and hopes of US economic recovery as states continue to re-open, has stimulated risk sentiment this week.
Technical Analysis:
NZDUSD bulls are back in control after a brief corrective drop over the last week. They have managed to rally over 200 pips since 0.5920 lows. An intermediary high was print at 0.6157 levels yesterday, before pulling back. Corrective drops remain possible towards 0.6000 levels before resuming its rally towards 0.6450, going forward.
NZDUSD might have carved a meaningful bottom around 0.5470 levels in March 2020. Since then, bulls have managed to carve a series of higher highs and higher lows and are looking poised to take out immediate resistance at 0.6450. Interim support is now seen at 0.5920 and prices should ideally stay higher.
NZDUSD may drop to fibonacci 0.618 retracement of the recent rally between 0.5920 and 0.6157, which is seen around 0.6000/10 levels before resuming its rally towards 0.6450, going forward. Traders might be willing to initiate fresh long positions around 0.6000 levels with stop below 0.5920, targeting 0.6450.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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