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NZD/USD Rally Vulnerable Ahead of 7300- New Zealand CPI on Tap

NZD/USD Rally Vulnerable Ahead of 7300- New Zealand CPI on Tap

Talking Points



Technical Outlook: Kiwi is up more than 4.6% year-to-date with the rally now eyeing key technical resistance at 7292/96 heading into tonight’s New Zealand Consumer Price Index (CPI). This level is defined by the March 2015 low-day close & the July high-day close and converges on former channel support over the next few days. The immediate long-bias is at risk while below this threshold.

NZDUSD 120min

NZD/USD 120min

Notes: A closer look at price action shows Kiwi trading within the confines of an ascending pitchfork formation extending off the December lows with the overnight stretch-high tagging the upper parallel. We still could see some further upside from here but the risk for a near-term exhaustion prevails while below 7292/96. A break below the median-line targets 7186 & the lower parallel / weekly open at 7162. Ultimately a break below this region would be needed to suggest a more significant turn is underway.

A rally surpassing 7300 would invalidate the reversal play with such a scenario targeting 7352 & 7400. Keep in mind inflation is expected to uptick to 1.2% y/y, up from just 0.4% y/y in Q3 and would be the highest print since June of 2014. From a trading standpoint, heading into the release I would be looking for exhaustion while below 7300.

  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are short NZD/USD - the ratio stands at -1.64 (38% of traders are long)- bullish reading
  • Long positions are 2.6% higher than yesterday and 13.6% above levels seen last week
  • Short positions are 2.4% lower than yesterday but 1.1% above levels seen last week
  • Open interest is 0.6% lower than yesterday but remains 4.3% above its monthly average
  • The current dynamic offers a mixed signal but it’s worth noting that increasing long positions / narrowing in the SSI ratio from recent January extremes (-1.88) suggest that the immediate advance is vulnerable near-term, especially as price approaches technical resistance.

Relevant Data Releases

Looking for trade ideas? Review DailyFX’s 2017 1Q Projections

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at or Click Here to be added to his email distribution list.

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