NZD/USD: All eyes on .6650 ahead of NZ trade data
Matt Weller, CFA, CMT March 23, 2016 12:15 PM
The dollar remains the currency market’s standout performer for the second straight day, gaining value against each of its major rivals after this morning’s as-expected New Home Sales report. Despite consistent strength in the greenback each day this week, the world’s reserve currency is still down from its pre-Fed levels of last week, so it’s difficult to draw any conclusions about the sustainability of the current move, especially due to the lower liquidity pre-holiday conditions.
In terms of economic data, traders are looking ahead to tomorrow’s releases (including UK retail sales, US durable goods, and US initial unemployment claims) for potentially the last gasp of volatility this week, but impatient traders may want to key in on the NZD/USD. The kiwi will see the release of February’s trade balance data at 5:45 PM ET (21:45 GMT) and because exports make up nearly 30% of the island country’s GDP, this report may lead to a decent move in tomorrow’s early Asian session. Traders have penciled in a potential trade surplus of 75M, but if the slowdown in China is more severe than economists’ anticipated, we could see New Zealand slip back into a trade deficit.
Technical view: NZD/USD
Turning our attention to the chart reveals a number of key levels and patterns to monitor. Most importantly, NZD/USD has carved out an approximately 500-pip range between .6400 and .6900 over the last six months, so the medium-term "trend" is more sideways than anything. That said, the pair has been gradually rising within a (volatile) bullish channel over the last several weeks, and there are signs that the long-term bearish trend may finally be turning; namely, NZD/USD saw a bullish "golden cross" of the 50-day MA above the 200-day MA, though it’s worth noting that the 200-day MA continues to trend lower, potentially weakening the bullish implications of the signal.
Moving forward, readers should watch the short-term bullish channel to see if support near .6650 holds (note that a breakdown in the RSI indicator from its 45-60 range could provide a leading/confirming signal of a breakdown in the exchange rate itself). If the bottom of the bullish channel holds, rates could rally up to retest the .6900 next week. On the other hand, a breakdown through the channel (and the converging moving averages) would open the door for a continuation down to the bottom of the six-month range at .6400.
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.