Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows in March 2020. The currency has managed to print a shallow high around 0.6600 mark, which is potential resistance. Bears might be inclined to regain control from here.
Fundamental Outlook:
NZDUSD had raised through 0.6600 mark last week before facing an increased selling pressure. The exchange rate is trading lower at 0.6550/55 as we prepare to publish the update. With rising trade war situation between US-China, COVID-19 pandemic rising again, the risk related currency NZD might be exposed to further downside.
USDJPY had rallied towards 107.31 before reversing, and closed lower towards 106.92 levels. The US Dollar has come under pressure since the last 2 trading sessions, as risk appetite returned. Global Indices managed to rally along with the EURO against the safe haven US Dollar.
SPX500 futures has rallied over +2.3% in the past 2 trading sessions. The indice managed to print 3241 intraday before closing at 3230 yesterday. Hopes over the COVID-19 vaccine developments from Moderna has kept the investor sentiment upbeat, pushing risk assets higher.
Technical Analysis:
NZDUSD might be preparing to turn lower towards 0.6170 levels at least, before turning bullish again. Also note that potential remains for a drop towards 0.5900 levels, which is fibonacci 0.618 retracement of the entire rally between 0.5470 and 0.6600 respectively.
NZDUSD might have formed a potential bottom around 0.5470 levels in March 2020. It has managed to carve a series of higher highs and higher lows until 0.6600 highs recently. Unlike its counterpart AUDUSD, it has not been able to take out major resistance at 0.6760.
Furthermore, the recent high at 0.6600 is accompanied by a bearish divergence on the daily RSI as highlighted. High probability remains for a bearish reversal from here, which could at least produce a corrective drop towards 0.6170 levels.
The 0.6170 mark is fibonacci 0.382 retracement of the above rally and a bullish bounce could be expected. Probabilities remain for an extended drop towards 0.5900, which is the 0.618 retracement of the above drop.
Traders might have booked profits on long positions taken earlier and remain flat for now as NZDUSD retraces lower. They might be preparing to go long again at lower levels around 0.6170 and 0.5900 respectively.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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