Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows in March 2020. The currency hold well below the 0.6715 resistance and carves a lower high around 0.6651 yesterday. Bears are looking poised to remain in control.
Fundamental Outlook:
NZDUSD dropped by over -0.50% yesterday after hitting 0.6651 highs during the day. The exchange rate had dropped sharply after the FOMC minutes as US Dollar gained across the board. The Fed might be inclined to keep interest rates unchanged on September 16, 2020 meet. The US Dollar Index finally gained around +0.75% closing at 93.00 handle yesterday.
SPX500 futures managed to touch 3399.8 yesterday before reversing sharply. Please note that futures had hit 3398.2 on February 20, 2020 before the collapse. As we prepare to publish, the indice is trading around 3359.00 and might continue to drift lower. It might be too early to confirm but this could be the beginning of potential risk aversion, going forward.
USDJPY had managed to gain over +0.50%, closing above the 106.00 handle yesterday. The exchange rate might continue to gain over the next several trading sessions as US Dollar might gain significantly as risk assets sell off. Global equity markets might remain vulnerable for another collapse, going forward.
Technical Analysis:
NZDUSD might have carved a potential lower high around 0.6651 yesterday, as it continues to hold resistance at 0.6715 mark. Bears are looking to push further lower towards 0.6230 and 0.5950 levels respectively, before the support comes in. Lower against 0.6715 for now.
NZDUSD had earlier dropped to multi-year lows towards 0.6470 in March. The currency has remained in control of bulls since then, and managed to carve a series of higher highs and higher lows through 0.6715 levels around August 02, 2020. The rally could be seen as an impulse wave, almost taking out past resistance around 0.6760 levels.
Ideally a corrective drop should unfold after having completed an impulse. The currency might be preparing to produce a corrective drop (counter trend) towards 0.6239, followed by 0.5950 levels respectively. The initial drop is expected to find support around 0.6230 mark.
Also note that fibonacci 0.618 retracement of the entire rally is seen towards 0.5950 levels. High probability remains for a bullish bounce, if prices manage to reach there. Only a consistent rally past 0.6715 would change the above intermediary bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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