Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows since March 2020. The currency pair might have carved a potential high at 0.6715 and could retrace lower in the near term. Watch out for next major support around 0.5950 levels.
Fundamental Outlook:
NZDUSD had rallied over +1.0% and closed comfortable above the 0.6600 handle yesterday. The recent strength might be fueled by risk sentiment as Dow Jones, SPX500, NASDAQ and DAX managed to close higher again. It remains to be seen how markets react to the Jackson Hole Symposium starting today. The US Dollar Index might be setting up to gain over the next several weeks.
SPX500 futures climbed to fresh highs at 3486, closing above +1.0% yesterday. It might be anybody’s guess over a potential bearish reversal but the indices faces a major event risk. Investors could be closely following the Jackson Hole Symposium starting today. Any tone of pessimism by Fed Chair Jerome Powell might trigger a reversal across global indices.
USDJPY had print highs around 106.50 yesterday before pulling back and managed to close just below 106.00. The exchange rate might remain volatile amid news of resignation from Prime Minister Abe due to health concerns. The Jackson Hole event might further add to the volatility.
Technical Analysis:
NZDUSD might have carved a potential intermediary top around 0.6715 levels, and should be looking to produce a corrective drop towards 0.5950 mark in the next few weeks. The currency is seen to be trading just above the 0.6600 handle for now and bears looking poised to resume lower.
NZDUSD had print multi-year lows around 0.5470 in March 2020. Since then, bulls have remained in control and carved a series of higher highs and higher lows through 0.6715 recently. The entire rally is seen as an impulse wave, which should ideally be retraced by a corrective drop.
The proposed corrective drop could reach fibonacci 0.618 retracement of the entire rally between 0.5470 through 0.6715 respectively, around 0.5950. High probability remains for a bullish bounce if NZDUSD drops to above levels. Bulls would be looking to take control thereafter.
Most traders might have initiated fresh short positions close to 0.6600/50 levels, with protective stops above 0.6715 and projected targets towards 0.5950 respectively. Only a break above 0.6715 would change the above bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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