Bottom line: NZDUSD medium term structure continues to remain bullish until prices stay above 0.5470 levels. Bulls have managed to print 0.6443 highs, very close to the 0.6450 resistance. We can expect a short pullback or retracement, before the rally continues.
Fundamental Outlook:
NZDUSD managed to climb higher and push through 0.6443 levels yesterday, as the US Dollar continued to weaken against majors. With NFP to be out tomorrow, NZDUSD may continue higher as further 8 million jobs are expected to be lost in May. If the Reserve Bank of New Zealand decides to implement “negative interest rate policy”, NZDUSD may come under pressure, going forward.
SPX500 managed to clock yet another day in the Green closing at 3122, a gain of +1.36%. Futures pushed through 3131 highs yesterday and are seen to be cooling off a bit now at 3112 mark. The NASDAQ inches closer to all-time highs indicating almost a V-Shaped recovery.
Optimism over Fed measures and a V-shaped economic recovery has led to the risk in Risk-Assets as investors continue to remain hopeful despite the rising tensions among the world’s largest economies US and China. Adding further are the rising protests in US over the killing of George Floyd.
USDJPY has risen sharply over the last few trading sessions and is back above the 109.00 mark. This was natural as the anti-risk Japanese Yen continues to loose against risk sentiment. This could easily reverse though, if COVID-19 infections burst over the next few days.
Technical Analysis:
NZDUSD bulls have finally managed to hit resistance at 0.6450, barely missing by a few pips. The currency is trading around 0.6420 levels as we write this article and is expected to push through 0.6450 one last time before producing a corrective drop.
NZDUSD seems to have carved a meaningful bottom around the 0.5470 mark and since then, bulls have managed to carve a series of higher lows and higher highs. It is quite possible for NZDUSD to drop towards 0.6200 levels before resuming higher towards 0.6750/60 resistance.
The RSI on daily chart is also approaching 75.00 levels and it would be natural for NZDUSD to correct lower. The fibonacci 0.382 retracement of recent rally between 0.5900 and 0.6443 is seen towards 0.6240/50. High probability remains for a bullish bounce if prices manage to drop towards those levels.
Traders might be willing to book profits around 0.6450 and remain flat for a while. A corrective drop towards 0.6200/50 might be good for traders to consider initiating fresh long positions.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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