Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows print in March 2020. The currency seems to have hit a major resistance around 0.6715 levels over the last week. Bears might be looking to take control back, going forward.
Fundamental Outlook:
NZDUSD had peaked at 0.6715 mark on July 31, 2020 before reversing. The exchange rate is currently seen around 0.6650 mark and is expected to drop further as NZDUSD faces renewed selling pressure over rising US-China rift. Risk appetite might swiftly reverse, dragging NZDUSD down as well.
SPX500 continued its rally and managed to close higher by +0.64%, around 3327. Dow Jones had also rallied over +1.39% closing around 27200 mark. The optimism over stimulus hopes has added to the above rally but this might reverse as US-China tensions continue to escalate further. In the latest, the US Secretary has urged Google and Apple to remove Chinese Apps from their app stores.
USDJPY had managed to rally through 106.50 levels over the last week. The exchange rate is trading lower towards 105.40 mark as we prepare to publish today’s update and set to rise further as US Dollar might gain over the next several weeks. The decision on extending USD 600 per week unemployment benefit is still pending.
Technical Analysis:
NZDUSD might have managed to hit major resistance around 0.6700/15 levels last week. The currency had reversed sharply towards 0.6575 early this week, before pulling back through 0.6673. This could be seen as a retracement, as bears remain inclined to resume lower.
NZDUSD had dropped to 0.5470 levels in March 2020, and since then has remained in control of bulls. It has rallied from 0.5470 lows through 0.6715 levels, carving a series of higher highs and higher lows. This could be seen as an impulse wave, and ideally followed by a correction.
NZDUSD bears are looking poised to produce a meaningful drop until prices stay below 0.6715 mark. The drop could reach up to 0.5950 levels, which is fibonacci 0.618 support of the earlier rally. High probability remains for a bullish bounce, if prices manage to reach there.
Most traders might have initiated fresh short positions around 0.6650/0.6700 mark, with protective stop just above 0.6750 and projected target towards 0.5950 levels respectively. A break above 0.6715 could test 0.6750 levels before reversing lower again.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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