Bottom line: NZDUSD medium to long term structure continues to remain bullish against 0.5470 lows in March 2020. It might be facing resistance around 0.6585 mark, and correct lower 0.6300/0.6200 levels over the short term.
Fundamental Outlook:
NZDUSD managed to rally testing June 2020 highs at 0.6585 yesterday. The rally across risk assets helped the New Zealand Dollar gain against the USD, despite the steady rise of COVID-19 infections in the United States along with Brazil and other Asian countries.
USDJPY came under pressure again and dropped to monthly lows around 107.15 before finding some support. The US Dollar Index dropped to 96.40 as EUR, GBP, CHF, AUD gained alongside Global Equity Markets. Gold also broke the $1800 mark and registered new highs at $1818 yesterday.
SPX500 futures rallied close to +1.0% and closed around 3175, alongside Dow Jones futures as the euphoria continues across Global Equity Markets. With COVID-19 infections crossing the 3 million mark in the United States, and the Q2 earning season ahead, it remains to be seen how long the party continues. Believe it or not, one fundamental event might be enough to trigger a massive risk aversion.
Technical Analysis:
NZDUSD might be facing resistance around recent swing highs at 0.6585 levels. Bears are looking poised to resume lower towards 0.6200/0.6300 mark at least before the next rally could resume. NZDUSD should ideally stay below 0.6585 levels for the above structure to hold.
NZDUSD is also facing strong resistance around 0.6760 mark. A push above 0.6585 from here would encourage bulls to test the above resistance. Also note the fibonacci 0.382 retracement of the entire drop between 0.8850 and 0.5470 is also seen to be passing around 0.6750 mark.
NZDUSD bulls have managed to carve a series of higher highs and higher lows since 0.5470 lows in March 2020. The rally until now seems to be corrective and NZDUSD might be vulnerable for a drop lower, going forward.
Most traders might want to book profits on the long positions taken earlier and remain flat as NZDUSD tests 0.6585 resistance. They might be preparing to initiate fresh long positions around 0.6200/0.6300 levels, allowing a correction.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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