Bottom line: NZDUSD long term structure remains bullish against 0.5470 lows since March 2020. In the near term through, the currency might have carved a meaningful top around 0.6790 levels. Bears are looking poised to stay in control from here on.
Fundamental Outlook:
NZDUSD had managed to push higher towards 0.6759 levels before finding renewed selling pressure. The exchange rate has dropped below 0.6700 as we prepare to publish and might remain under pressure. NZDUSD Q2 GDP has shrunk to -12.4%, which restrict pushing through 0.6790 highs over the next few weeks. Watch out for RBNZ monetary policy on September 23, 2020 for further guidance.
USDJPY has given in over 200 points in the last 5 trading sessions and print 104.80 yesterday. The exchange rate is trading above 105.10 as we prepare to publish and it remains to be seen if safe haven US Dollar could recover against Japanese Yen. The anti-risk Japanese Yen has significantly gained against EURO, GBP and USD in the past few sessions.
SPX500 pushed higher through 3428 levels before selling off post FOMC yesterday. The indice finally managed to close lower by -0.50% at 3385 mark. Futures are trading lower today around 3360 mark for now and it remains to be seen if risk aversion continues further. The US Dollar Index might further strengthen in that case.
Technical Analysis:
NZDUSD bears seem to be back in control after hitting potential resistance zone around 0.6730/50 levels yesterday. Bears are looking poised to push prices through 0.6300 and 0.6000 support over the next few weeks. Ideally, prices should stay below 0.6790 to keep bearish structure intact.
NZDUSD had produced a meticulous rally since printing fresh lows at 0.5470 mark, back in March 2020. Bulls remained in control, carving a series of higher highs and higher lows through 0.6790 levels recently. Also the rally has taken shape of an impulse wave, indicating the long term trend is UP.
Ideally, an impulse rally should be followed by a corrective drop. NZDUSD bears might be preparing for a meaningful corrective drop toward 0.6300 levels at least. It might extend through 0.6000 interim support, which is close to fibonacci 0.618 retracement of the entire rally.
Most traders might be preparing to initiate fresh short positions around current price action (0.6700/20), with protective stops placed above 0.6800 levels and projected target towards 0.6300/0.6000 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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