NZD/USD about to breakdown?
Fawad Razaqzada December 16, 2016 12:48 PM
The New Zealand dollar has so far been able to hold its own relatively well against the dollar despite the latter breaking to new multi-year highs against the likes of the euro and Swiss franc, and multi-month highs vs. the yen. But the bullish days for the NZD/USD could be numbered.
The New Zealand dollar has so far been able to hold its own relatively well against the dollar despite the latter breaking to new multi-year highs against the likes of the euro and Swiss franc, and multi-month highs vs. the yen. But the bullish days for the NZD/USD could be numbered. After all, the only thing that had been supporting the kiwi was the relatively higher interest rates in New Zealand. Well, now that the US Federal Reserve has raised interest rates again and turned hawkish, that argument is no longer enough to support the NZD/USD pair, not when at the same time the Reserve Bank of New Zealand is dovish. Thus I am expecting the NZD/USD to start heading lower once again.
The selling pressure could well and truly start if and when that key support around the 0.70 handle gives way. Specifically, it is the range between 0.6950-0.7010 that we are watching for a breakdown. Here, prior lows and the long-term 38.2% Fibonacci retracement come together. The initial test of this support range held after a big down move from around 0.7400. But that bounce ended at the 61.8% Fibonacci retracement level (as a side note, deep pullbacks are common when trends first start to change – in weak trends, it is the 38.2% or 50% where price usually turns after a counter-trend move).
If the abovementioned support area gives way as we expect that it might then we may see the start of the next big downward move, perhaps towards the 61.8% Fibonacci retracement against the 2015 low, at 0.6690. Conversely if support continues to hold then a re-test of the broken short-term support at 0.7115 could be the alternative scenario. The bearish bias would end if price starts to move north of the next resistance at 0.7180.
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.