Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows in March 2020. It is approaching a major prices resistance around 0.6700/50 mark and bears might be preparing to take control back from here.
Fundamental Outlook:
SPX500 managed to rally by +0.50% yesterday, closing around 3275 mark; supported by Q2 earnings. Believe it or not, the recent rally across Global Indices remains in complete divergence to reality. The indice might be taking its cues and trigger volatility, as US Congress debate over the new fiscal stimulus package.
COVID-19 infections still remain a major concern across US and Asian countries. US-China relations further deteriorated after US announced closure of Houston’s consulate yesterday. A Global Economic recession still looms large over COVID-19 pandemic effects. These facts might flip investor sentiment which is looking too optimistic at the moment.
NZDUSD is up over +0.50% as we prepare to publish today’s article, and is trading 0.6685 levels. The risk associated currency has been one the biggest beneficiaries since the exchange rate has risen from 0.5470 through 0.6685 levels. Traders might remain cautious around 0.6700 levels though.
Technical Analysis:
NZDUSD bears might be preparing to take control back from current levels around 0.6680 or after taking out 0.6700/50 resistance. Either way, the currency might be setting up for a meaningful corrective drop towards 0.6200 levels at least.
NZDUSD has been meticulously rallying since printing 0.5470 lows in March 2020. It has remained in control of bulls, managing to carve a series of higher highs and higher lows through 0.6689 levels until yesterday. It might attempt yet another push before giving in to bears.
Also note that the rally from 0.5470 through 0.6680 looks to be an impulse wave, which is either complete or would complete around 0.6700/50 levels. Ideally, an impulse wave is followed by a corrective wave on the opposite side.
Most traders might be preparing to initiate fresh short positions either around 0.6680 or from 0.6700/50 levels. Their protective stops might go above 0.6800 mark with projected targets towards 0.6200 levels at least.
Prepared by
Harsh Japee, Technical Analyst.
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