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NZD/USD - An Excercise In Falling Knife Catching

NZD/USD - An Excercise In Falling Knife Catching

2015-06-12 12:30:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • NZD/USD falls to fresh multi-year low
  • Kiwi breaks key support at .7000

Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.

NZD/USD has been under steady pressure since breaking a key trendline in early May and traded at a new low for the year this week. However, some caution is required in the exchange rate heading into next week as various forms of cycle analysis suggest that spot is susceptible to some sort of turn (or attempt at one) during this period. Tuesday/Wednesday is the focus, but we usually like to give these things a day or so on either side to materialize. This potential for a turnaround is further supported by extreme sentiment as the Daily Sentiment Index (DSI) recently dropped below 10% NZD bulls. Historically this has been a reliable indicator of an overextended market. With spot breaking below psychological support around .7000 there is obviously a lot of risk that it will just continue lower. As such we would like to see the Kiwi show signs of some strength first before positioning. A daily settlement back above .7000 after Monday probably would be enough evidence of this. Continued weakness in the pair past Thursday would invalidate the positive cyclicality.

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NZD/USD Daily Chart: June 12, 2015

NZD/USD - An Excercise In Falling Knife Catching

ChartPrepared by Kristian Kerr

Key Event Risk in the Week Ahead:

NZD/USD - An Excercise In Falling Knife Catching

LEVELS TO WATCH

Resistance: .7000 (Fibonacci), .7160 (March low)

Support: .6970 (Fibonacci) .6800 (Fibonacci)

Strategy: Buy NZD/USD

Entry: Buy NZD/USD on a close above .7000 on Tuesday/Wednesday

Stop: Daily close below .6970

Target: Open

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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