Are commodity currencies about to reverse vs the US Dollar?

NZD/USD and AUD/USD have hit key Fibonacci retracement levels and held.

U Turn 1

As Shanghai begins to reopen after recent lockdowns, manufacturing activity in China is likely to pick up again.  (Markets will see how much damage was done when China releases its PMI data at the beginning of June). This is likely to mean more demand for commodities, and as a result, possible higher prices for commodity currencies.  NZD/USD and AUD/USD have reached key Fibonacci retracement levels on the weekly timeframe and held thus far.  Does this mean that they are likely to reverse?

NZD/USD reached a pandemic low in March 2020 of 0.5469.  The pair then made an aggressive bid higher into February 2021 and reached a high of 0.7465.  Since then, the pair has been pulling back and after 7 consecutive weeks of declines, it finally reached the 61.8% Fibonacci retracement from the March 2020 lows to the February 2021 highs near 0.6231 and held.  Last week, NZD/USD formed a bullish engulfing candle on the weekly timeframe and the pair is continuing higher this week.  First resistance is at the lows from the week of January 24th at 0.6574 and then up to the highs of the week of April 4th and the downward sloping trendline near 0.7034.  Support is at the recent lows near the previously mentioned 61.8% Fibonacci retracement at 0.6399. Below there is some minor support from April 2020 at 0.6176.

20220526 nzdusd weekly

Source: Tradingview, Stone X

AUD/USD fell to a pandemic low in March 2020 of 0.5506.  As with the Kiwi, the Aussie vs the US Dollar made a high print in February 2021 of 0.7870 and has been pulling back since.  However, AUD/USD only pulled back to the 38.2% Fibonacci retracement level from the lows of March 2020 to the highs of February 2021,near 0.7050. The psychological round number support level of 0.7000 may be a more important number to watch, as that level has acted as support or resistance over the past several years.  Price reached a low of 0.6828 during the week of May 9th and bounced.  First resistance is at the highs from the week of May 2nd near 0.7266 and then the downward sloping trendline dating to the February 2021 highs near 0.7450.  First support is at the recent low of 0.6828, then the 50% retracement level from the March 2020 lows to the February 2021 highs at 0.6570.

20220526 audusd weekly

Source: Tradingview, Stone X

NZD/USD and AUD/USD have hit key Fibonacci retracement levels and held.  Will the pairs now being to move higher in the longer-term?  The answer may be dependent on how quickly China can reopen Shanghai and the rest of the country after restrictions and lockdowns due to Covid.


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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account