Bottom line: NZDUSD medium term outlook remains bullish against 0.5470 lows. Bulls might be preparing for another push towards 0.6755 resistance before resuming a corrective phase.
Fundamental Outlook:
NZDUSD dropped around -1.25% yesterday, closing in at 0.6408 levels. The Reserve Bank of New Zealand kept official cash rate (OCR) unchanged to 0.25%. Further, it has also prepared to provide more stimulus if required and kept doors open for a Negative Interest Policy going forward. The risk associated currency exchange rate might come under renewed selling pressure.
USDJPY managed to recover some of its lost ground as the exchange rate closed above 107.00 mark. The exchange rate could rise towards 108.30/40 levels in the short term. The anti-risk Japanese Yen could gain traction soon as Global Equity Markets selloff yet again.
SPX500 dropped over -2.0% yesterday, closing in at 3061 mark. Investor psychology remains too fragile and risk sentiment reversed sharply as the IMF lowered its growth forecast to -4.9% for 2020. The earlier forecast was -3.0%. Adding further is the fear of a second wave of COVID-19 infections as cases continue to rise in the US and other countries.
Technical Analysis:
NZDUSD has remained in control of bulls since 0.5470 lows in March. It has also managed to break past initial resistance at 0.6450 levels printing fresh highs at 0.6585 this month. The drop since then is looking corrective and bulls might remain poised to push towards 0.6755 levels, going forward.
NZDUSD might have carved a meaningful bottom around 0.5470 levels. The fibonacci 1.618 extension of initial rally between 0.5470 and 0.6070 is pointing towards 0.6850 levels. High probability remains for a push higher as the above level also converges with the fibonacci 0.382 retracement of the drop between 0.8842 and 0.5470 respectively.
Traders might be willing to initiate fresh long positions around current price action (0.6400/10), with protective stops below 0.6200 and projected targets above 0.6755 respectively. For the above structure to remain intact, NZDUSD must stay above 0.6175.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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