Today is Sun, November 19, 2017 13:14:23 GMT
RSS Follow Us Follow us on Twitter Friend us on Facebook
Contributors Top Trade Idea For August 6th, 2014 – NZD/USD

forex_logo

It seems like a long time ago when the NZD/USD was pressing against the 2011 peak of around 0.8800/40. A verbal intervention from the RBNZ was enough to shoot it down by a few hundred pips from there, and the Kiwi was pressured further by continued falls in New Zealand’s dairy prices.  But with interest rates being 3.5% in New Zealand, which is way higher than any other developed nations, including the US, it may not be a one-way trade on the Kiwi after all. Although QE is coming to an end in the US and interest rates may start rising soon, which would be USD-positive, they are unlikely to get anywhere close to the RBNZ’s 3.5% level any time soon. So, on that basis, a verbal invention from the RBNZ may not be enough to hold down the exchange rate on a sustainable basis. Actions speak louder than words as the ECB’s Mario Draghi found out before their June intervention and as RBA’s Glenn Stevens is realising now.

From a technical point of view, there is a chance we may see a bounce back at around the current levels of 0.8445/55. As can be seen from the charts, below, this is where a medium-term bullish trend line meets the 200-day moving average. A potential close above here would be a bullish development in the very short-term while above 0.8530 could see the Kiwi squeeze higher towards the 50-day moving average (0.8635) before deciding on its next move. The daily RSI meanwhile is currently below the oversold threshold of 30 and has created a small positive divergence with the underlying price. This suggests that the bearish momentum may be fading a little. The next key support level is around 0.8400 which also ties in with the 38.2% Fibonacci retracement of the up move from the 2013 low. Even if we were to get there, it would still represent a shallow retracement from a long-term perspective. Thus if the NZD/USD could hold above here then we could see another leg higher at some point in the near future.

Meanwhile a separate, longer-term, bullish trend line comes in slightly below the 0.8400 level, which is also definitely worth watching for if that breaks then it would validate the double top formation that is visible on the week chart. Needless to say, a break below that trend line could pave the way for some significant falls. Only then will my long-term bullish outlook will change. For now though, I am neutral.

Figure 1:

14.08.06 nzd.usd. daily

Source: FOREX.com

Figure 2:

14.08.06 nzd.usd. weekly

Source: FOREX.com

About Fawad Razaqzada

fr

Fawad is FOREX.com’s technical analyst based in London. He entered the FX market in early 2010. Having graduated from Brunel University with a degree in economics, and mentored by some of the industry’s leading experts, he has an excellent understanding of the fundamental drivers of the markets. But it is his unique ability to predict price moves using technical analysis that has made him popular amongst his peers. Fawad is regularly quoted in the leading financial publications such as the Wall Street Journal, Reuters, Market Watch, FT and Associated Press. On a day to day basis, Fawad produces and delivers market commentary and research for FOREX.com, with an emphasis on technical analysis. He achieved his CISI Level 3 Certificate in Investments (Derivatives – Retail) in early 2011.

Recent posts by Fawad Razaqzada