Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows. Over the near term though, the currency might have carved a meaningful top around 0.6800 handle over the last week. Bears might be poised to remain in control from here.
Fundamental Outlook:
NZDUSD has been dropping since printing highs around 0.6800 on September 18, 2020. The exchange rate has erased over 275 pips and is trading around 0.6530 mark as we prepare to publish. If risk aversion continues further, the exchange rate might continue to remain under pressure.
USDJPY has bounced back after printing 104.00 lows early this week. The exchange rate has gained over 140 pips and is trading close to 105.40/45 mark as we prepare to publish. The safe haven US Dollar and anti-risk Japanese Yen have remained beneficiaries as global markets and risk assets continue to drop. The exchange rate might gain over the next several weeks.
SPX500 continued its drop further closing around 3242, down by -2.14% yesterday. The indice futures trade lower today around 3229 as we prepare to publish. Dow Jones was down -1.81%, while NASDAQ had collapsed close to -3.00% as risk aversion continues. Investors might remain cautious over the next several weeks as the safe haven US Dollar might continue its gains.
Technical Analysis:
NZDUSD bears are back in control since printing highs around 0.6800 handle on September 18, 2020. The currency has given in close to 275 pips since then and is trading close to major support around 0.6500 mark. Bears might be preparing to produce a much deeper corrective drop.
NZDUSD had produced a meticulous rally between 0.5470 lows since March 2020 through 0.6800 highs in September. The currency remained in control of bulls and managed to carve the above impulse wave on the daily chart, taking out major past resistance at 0.6790 levels.
Ideally an impulse wave is followed by a corrective wave in the opposite direction and also note that after taking out a major resistance at 0.6790 mark, bulls might want to take a break. NZDUSD bears might be preparing for a meaningful corrective drop towards 0.6000 levels.
Also note that 0.6000 is fibonacci 0.618 retracement of the entire rally between 0.5470 and 0.6800 levels respectively. High probability remains for a bullish bounce if prices manage to reach there, going forward. Please note that 0.6800 resistance should hold.
Most traders might be inclined to remain short from here and look to add around 0.6700/50 resistance zone. The protective stop would stay above 0.6800 handle while projected target might be towards 0.6000 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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