NZD Technical Analysis

Talking Points:

• NZD/USD Technical Strategy: Flat
• Kiwi Dollar Pauses to Digest Losses After Sliding to 2-Month Low vs. US Counterpart
• Waiting to Establish Better-Defined Risk/Reward Parameters to Initiate Short Position

The New Zealand Dollar paused to consolidate after slumping to the weakest level in a month against its US counterpart in the aftermath of last week’s strong US jobs data. Prices have now erased more than half of the advance late-September lows.

From here, a daily close below the 61.8% Fibonacci retracement at 0.6488 sees the next key downside barrier at 0.6391, the 76.4% level. Alternatively, a move back above the 50% Fib at 0.6566 – now recast as resistance – opens the way for a retest of the 0.6618-44 zone marked by the October 13 low and the 38.2% retracement.

Tactical considerations argue against taking a trade at current levels. First, the available trading range is too narrow relative to ATR. Second, prices are too close to support to justify entering short from a risk/reward perspective. We will remain on the sidelines for now, waiting for the pair to offer a better-defined opportunity.


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Talking Points

• NZD/USD near important timing pivot
• Reversal eyed later this week

NZD/USD: Second Half of the Week Looks Incredibly Important For Kiwi

It is shaping up to be an important week for the commodity bloc currencies from a timing perspective. I have already highlighted some of the timing relationships in USD/CAD, but some interesting relationships are also aligning nicely in NZD/USD. The most important is related to the Armstrong Pi cycle as Kiwi will be 1570.5 (1/2 Pi) calendar days from the all-time high in the exchange rate recorded on August 1st 2011. This relationship can prove pretty important in its own right, but when it coincides with other “unrelated” timing techniques my attention perks up. In addition to the Pi cycle relationship this week we also have the 38% retracement in time of the year-to-date range, the 38% retracement of the time elapsed between the 2Q high close and the year’s low close and the measured move in time of the decline from the 2014 high to this year’s 1st quarter low (measured from the 2Q high).

All this suggests to me that we get a reversal or at least an attempt at one in the Kiwi. I am focused on the latter part of the week as that is when most of the relationships coincide so continued weakness into this time frame is potentially bullish. The 61.8% retracement of the 2009 – 2011 advance around .6425 and the 78.6% retracement of the August – October advance near .6350 are levels I will be watching closely for signs of a turn, but ultimately time is the more important variable here so I am open to a reversal from lower levels. An aggressive rally from here into the end of the week would obviously change the script a bit as would continued weakness past Monday of next week.

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D1 price is on primary bearish market condition with the local uptrend as the bear market rally: price broke 100 day SMA from below to above and it is located to be between 100 day SMA and 200 day SMA for the ranging condition wiaitng for direction:

• The price is trying to break 0.6835 resistance and 0.6896 resistance levels for the bullish reversal.
• Key support level for the bearish trend to be continuing without raning is 0.6463 level.
• RSI indicator is estomating the local uptrend as the secondary market rally to be continuing with good possibility to the reversal of the price movement from the primary bearish to the primary bullish market condition.
• "Near-term support is at 0.6777, the 23.6% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 38.2% Fib retracement at 0.6680. Alternatively, a push above the 0.6836-47 area marked by the 38.2% expansion and the aforementioned trend line paves the way for a challenge of the 0.6884-97 zone (50% expansion, October 15 high)."
• "We are keen to enter short NZD/USD in line with the longer-term down trend. However, the absence of a discrete reversal signal warns that pulling the trigger may be premature for now. With that in mind, we will remain on the sidelines for the time being and wait for greater clarity to emerge."

If the price will break 0.6463 support level on close D1 bar so the primary bearish will be continuing without ranging.
If the price will break 0.6896 resistance level so we may see the reversal of the price movement from primary bearish to the primary bullish market condition.
If not so the price will be ranging within the levels.

Resistance	Support
0.6835	0.6680
0.6896	0.6463

Trend: bear market rally


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• "The New Zealand Dollar looks poised to challenge two-month highs against its US counterpart below the 0.69 figure having extended upward for a third consecutive day. Prices have also broken above trend line resistance capping gains since July 2014, hinting a larger reversal may be ahead."
• "A daily close above the 0.6884-97 area marked by the 50% Fibonacci expansion and the October 15 high opens the door for a challenge of the 61.8% level at 0.6932. Alternatively, a move back below support-turned-resistance at 0.6836, the intersection of the trend line and the 38.2% Fib, paves the way for a retest of the 23.6% expansion at 0.6777."
• "Risk/reward considerations argue against taking a trade at current levels. First, prices are too close to resistance to justify entering long. Second, the absence of a clear-cut bearish reversal signal suggests taking up the short side is premature."

The daily price is on bullish market condition for the ranging within the following key reversal support/resistance level:

• 0.6896 resistance level located far above Ichimoku cloud in the bullish area of the daily chart, and
• 0.6492 support level located below Ichimoku cloud in the bearish area.

Absolute Strength indicator is estimating the flat condition, and Trend Strength indicator is forecasting the bullish trend to be continuing.

If the price will break 0.6492 support level so the price will be reversed to the bearish market condition with 0.6427 level as the next bearish target.
If the price will break 0.6896 resistance level so the bullish trend will be continuing.
If not so the price will be ranging within the levels.

• Recommendation for long: watch close price to break 0.6896 for possible buy trade
• Recommendation to go short: watch the price to break 0.6492 support level for possible sell trade with 0.6427 target for re-enter
• Trading Summary: ranging bullish

Resistance	Support
0.6885	0.6492
0.6896	0.6427

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Daily price is braking 200 day SMA for the bullish reversal:

• The price is breaking Fibo resistance level at 0.6748 together with 200 day SMA for the reversal of the price movement form the primary bearish to the primary bullish market condition.
• "The New Zealand Dollar finds itself at trend-setting resistance that has capped gains versus the currency’s US counterpart since early July 2014. The pair’s behavior at this critical juncture may prove defining for trend development in the weeks and months ahead."
• "A daily close above the 76.4% Fibonacci retracement at 0.6757 opens the door for a test double top resistance in the 0.6883-97 area. Alternatively, move back below the 61.8% Fib at 0.6678 paves the way for a challenge of the 50% level at 0.6615."
• "We are keen to enter short NZD/USD in line with the long-term downward trajectory. An actionable reversal signal triggering the position is absent for the time being however. With that in mind, we will remain on the sidelines until a compelling setup presents itself."

If the price will break Fibo resistance level at 0.6748 from below to above so the primary bullish trend will be continuing with good possible breakout of the price movement.
If not so the price will be ranging between within the level.

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W1 price is located below 200 period SMA and near 100 period SMA for the primary bearish market condition with the secondary ranging: the price is ranging within 50.0% Fibo resistance level at 1.1010 and Fibo support level at 1.0494.

If the price will break Fibo support level at 1.0494 so the bearish trend will be continuing.
If the price will break 50.0% Fibo resistance level at 1.1010 from below to above so the local uptrebd as the secondary bear market rally will be started with the good possibility to the reversal of the price movement to the bullish market condition.
If not so the price will be ranging within the levels.

Trend:

• W1 - ranging bearish

Daily price was crossed 200-day SMA/100-day SNA area for the bullish reversal with Fibo support at 0.6773 as the next target for the bullish trend to be continuing:

• "The New Zealand Dollar is attempting to renew upside momentum against its US namesake as prices broke upward to the highest level in nearly two months. The currency mounted a swift advance following an unexpectedly strong set of trade figures."
• "Near-term resistance is at 0.6746, the 50% Fibonacci expansion, with a break above that on a daily closing basis exposing the 61.8% level at 0.6794. Alternatively, a reversal below the 38.2% Fib at 0.6699 paves the way for a challenge of rising trend line support set from late January, now at 0.6631."

Trend:

• D1 - rbullish breakout

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• NZD/USD Technical Strategy: Flat
• New Zealand Dollar breaks 2-month uptrend, hints at deeper losses ahead
• Waiting to enter short trade as FOMC rate decision threatens positioning

The New Zealand Dollar may have turned a corner against its US counterpart after prices broke support guiding the move higher since late January. Prices established a top near the 0.68 figure with the formation of a bearish Evening Star candlestick pattern last week.

Near-term support is now at 0.6551, the 50% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a challenge of the 61.8% level at 0.6488. Alternatively, a reversal back above the 38.2% Fib 0.6614 paves the way for a re-test of trend line support-turned-resistance, now at 0.6650.


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Intra-day price is located between SMA with period 100 (100 SMA) and SMA with the period 200 (200 SMA) for the ranging market condition waiting for the direction for the possible breakout or breakdown.

• If the price will break 1.1138 resistance level so the bullish reversal will be started.
• If price will break 1.1043 support so the bearish trend will be continuing within ranging.
• If not so the price will be ranging within the levels.

Resistance	Support
1.1138	1.1043
1.1331	N/A

• Recommendation to go short: watch the price to break 1.1043 support level for possible sell trade
• Recommendation to go long: watch the price to break 1.1138 resistance level for possible buy trade
• Trading Summary: ranging

SUMMARY : ranging

TREND : waiting for direction

The New Zealand Dollar is edging lower after finding resistance at a nine-month high below the 0.70 figure against its US counterpart. Prices appear to be carving out a bearish Rising Wedge chart formation, which hints a larger reversal downward may be brewing.

Near-term support is at 0.6820, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of 0.6730 marked by the 38.2% level and the would-be wedge floor. Alternatively, a move back above the 14.6% Fib at 0.6876 paves the way for a challenge of the 0.6940-66 area (wedge top, March 30 high).


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