Bottom line: NZDUSD long term structure remains bullish against 0.5470 lows. Over the short term though, the currency pair might have carved a meaningful top around 0.6715 levels and could produce a corrective drop towards 0.5950 levels.
Fundamental Outlook:
NZDUSD has been under pressure since hitting highs at 0.6715 levels on July 31, 2020. The exchange rate is trading below 0.6600 for now and could continue drifting towards 0.6200/30 at least. The risk associated NZDUSD might take cues from risk assets and global indices over the next few weeks.
Adding further pressure was the Reserve Bank of New Zealand dovish stance yesterday and keeping interest rates low at 0.25%. The RBNZ might be prepared for a negative interest rates policy and more stimulus if required.
SPX500 continues its rally yesterday by +1.40%, managing to close at 3380, just a few points away from all-time highs. The optimism surprisingly continues amidst geopolitical tensions between US-China on the rise. Further, US job markets looking gloomy with no consensus on the new stimulus package yet.
Technical Analysis:
NZDUSD might have carved a meaningful top around 0.6715 over the past weeks and is expected to remain in control of bears in the near term. It is trading around 0.6570 as we prepare to publish, as bears are looking poised to continue lower towards 0.6230 over the next few weeks.
NZDUSD had print 0.5470 lows in March 2020 and since then has been in control of bulls. They have managed to carve a series of higher highs and higher lows, completing an impulse wave through 0.6715 levels on July 31, 2020.
Ideally, an impulse rally should be followed by a corrective drop before resuming. Bears are expected to remain in control for now and continue pushing lower towards 0.6230 and 0.5950 levels going forward. Bottom line remains that NXDUSD should stay below 0.6715 mark.
Also note that fibonacci 0.618 retracement of the entire rally between 0.5470 and 0.6715 is passing through 0.5946 mark. High probability remains for a bullish reversal, if prices manage to reach there. We can expect NZDUSD to resume rally thereafter.
Most traders might be preparing to initiate fresh short positions around 0.6570/0.6600 levels, with protective stops above 0.6715 and projected targets towards 0.6230 and 0.5950 levels, over the next few weeks.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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