Has NZD/USD topped out?

The NZD/USD failed to maintain its early gains and turned sharply lower on Thursday. The sell-off came despite news that inflation in New Zealand had risen by a bigger-than-expected 0.4% in the fourth quarter versus 0.3% expected. On top of this, the latest economic pointers from the US, including jobless claims and new home sales, disappointed expectations on Thursday. Though there are no further data scheduled from NZ tonight, there is an important piece of data to look forward to from the US tomorrow: GDP. The world’s largest economy is expected to have grown 2.1% in the fourth quarter on an annualised basis versus 3.5% in Q3. If the actual number turns out to be better, then this could spark further dollar buying interest, potentially resulting in sell-off for the NZD/USD.

When price fails to respond in the way you would reasonably expect it to is usually a sign that the trend may be about to change. For the kiwi, it was the lack of a positive response to the inflation data that has me thinking that it may be about to turn sharply lower again. Interestingly, the NZD/USD reached a technical resistance level at 0.7310 overnight before heading lower. As can be seen, this level converges with several factors, namely (1) the backside of the broken bullish trend line, (2) the underside of the bearish trend line and (3) previous support and resistance level. For the sellers to take full control of the kiwi again they will need to reclaim the broken resistance at 0.7225 now, ideally on a daily closing basis tough we may see a bounce from this level as traders take profit on their bearish positions today. In any case, a sustained break below 0.7225 support would potentially pave the way for a move back towards 0.7000 support, with the 50- and 200-day moving averages being additional bearish targets in the interim. Alternatively, if support at 0.7225 holds and the kiwi eventually breaks through resistance at 0.7310, then price may go on to test prior reference points at 0.7400 or 0.7485 before deciding on its next move.

Source: eSignal and FOREX.com

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account