Bottom line: NZDUSD medium term structure still remains bullish against 0.5470 lows. Since bulls have managed to take out resistance at 0.6450, a corrective drop could materialize soon, before rally further towards 0.6740/70 mark.
Fundamental Outlook:
NZDUSD hits 0.6585 highs yesterday before pulling back sharply lower. The currency exchange rate has hit the highest level since February 2020 but remains vulnerable for downside pressure. After the Fed’s dovish forward guidance yesterday, Reserve Bank of New Zealand (RBNZ) is also expected to adapt a similar approach. Further, the RBNZ may opt for a Negative Interest Rate Policy if required, which could add further pressure on the exchange rate.
USDJPY exchange rate has lost almost 300 pips from recent highs at 109.85. The currency clocked in to 106.90 lows today before pulling back above 107.00 mark. The anti-risk Japanese Yen has gained over the past sessions as risk sentiment turned lower. Global Markets are easing off for the 3rd consecutive day as Dow Jones and SPX500 futures are down close to -1% as we write the article.
SPX500 futures are down for the 3rd consecutive trading session leaving investors confused after the progressive rally since May 14, 2020. The underlying facts of a looming Global Recession, rising tensions between US-China, protests in the US over the in-humane killing of George Floyd and potential risk of another round of COVID-19 infections, cannot be over looked as of yet.
Technical Analysis:
NZDUSD bulls have finally managed to push through initial resistance at 0.6450 levels. After printing highs at 0.6580, the currency is pulling back and is trading around 0.6490 levels. The pullback is expected to find support round 0.6300/0.6400 levels, before turning higher again.
Structurally, NZDUSD might have carved a meaningful low at 0.5470 earlier. Bulls have remained in control since then and carved a series of higher highs and higher lows towards 0.6580 levels. Immediate price support comes in around 0.6380/0.6400, which is also fibonacci 0.382 retracement of the recent rally between 0.6100 through 0.6580 respectively.
High probability remains for a bullish bounce around 0.6380/0.6400 levels, going further. A drop below 0.6200 would indicate that NZDUSD is poised for a deeper correction. Major support comes in around 0.5900 and ideally prices should stay above that mark.
Most traders might be preparing to book profits on long positions initiated earlier, around current levels (0.6490/0.6500) and remain flat. As NZDUSD pair corrects lower towards 0.6380 levels, bulls might be back in control.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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