Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows. After hitting the resistance zone around 0.6700/50, it is reversing lower and could possible extend the drop towards 0.5900/50 levels, going further.
Fundamental Outlook:
NZDUSD had managed to reach 0.6700/05 this week before reversing lower again. The pro-risk currency exchange rate might be coming under pressure over trade developments with China in recent times. Furthermore, as Global Markets remain vulnerable for a drop most risk assets and currency pairs might come under pressure. The exchange rate trades lower around 0.6635 for now.
USDJPY exchange rate has remained lower since the past few trading sessions, touching 104.80 mark post FOMC yesterday. US Dollar has been on the receiving end against EURO, Japanese Yen and Pound Sterling among others recently. The exchange rate trades above 105.20 as we prepare to publish.
SPX500 closed around 3264 yesterday, higher by +1.34%. The Dow Jones and NASDAQ also managed to close higher by +0.70% and +1.4% respectively. With the FOMC behind us markets might take cues from the Q2 GDP figures and the decision on extending US unemployment benefits, as it expires tomorrow.
Technical Analysis:
NZDUSD seems to be turning lower after hitting 0.6700/05 levels this week. As discussed over the last week, resistance should be strong around 0.6700/50 levels for bears to be back in control. A break below 0.6533 would be encouraging to bears.
NZDUSD had carved a potential bottom around 0.5470 levels in March 2020. The currency has remained in control of bulls since then, carving a series of higher highs and higher lows through 0.6700/05 mark yesterday.
Ideally, the entire rally between 0.5470 and 0.6700/05 mark should be retraced before resuming. The fibonacci 0.618 retracement is seen through 0.5950 mark and high probability remains for a bullish bounce if prices manage to reach there.
Most traders might be inclined to book profits on long positions initiated earlier and remain flat for now. Bulls might be poised to come back strong around 0.5900/50 mark over the next few weeks. A push towards 0.6750 remains possible before correcting lower.
Prepared by
Harsh Japee, Technical Analyst.
NZDUSD Chart
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