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NZD/USD: Has the Rally Finally Peaked?

NZD/USD: Has the Rally Finally Peaked?

2017-06-27 18:00:00
Michael Boutros, Strategist
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Talking Points

NZD/USD Daily

NZD/USD Daily Chart

Technical Outlook:NZD/USD failed another attempt to breach above the 2017 high-day close today at 7301 with intraday price action reversing sharply off basic trendline resistance extending off the April 2015 high. Note that this slope also converges on a median-line parallel extending off 6/14 high.

The rally was accompanied by ongoing divergence in momentum and once again highlights the risk for a corrective pullback in the pair. That said, we’ll be looking for further evidence of a turn in near-term price action before getting aggressive on the short-side.

NZD/USD 240min

NZD/USD 240min Chart

Notes: The rally registered a high at the 78.6% retracement of the decline off the 2016 high(7343) in Asia before turning lower despite broader USD weakness. Interim support rests with the weekly opening range low at 7260/62 with a break below 7226 needed to suggest a more meaningful pullback is underway. Such a scenario targets subsequent support objectives at 7170 backed by 7130.

A close above 7300 would put us neutral on the pair with a breach above 7343 needed to mark resumption of the broader up-trend. Remember that last week we noted that NZDUSD sentiment had reached record extremes and while the ratio has pulled back, price still needs to follow through to validate the reversal.

NZD/USD Sentiment
  • A summary of IG Client Sentimentshows traders are net-short NZD/USD- the ratio stands at -5.1 (16.4% of traders are long) - bullish reading
  • Retail has been net-short since May 24th; price has moved 5.2% higher since then
  • Long positions are 1.6% lower than yesterday and unchanged from last week
  • Short positions are 9.8% lower than yesterday and 4.6% higher from last week
  • Positioning is less net-short than yesterday but more net-short from last week and the combination of current sentiment and recent changes offers a mixed NZDUSD trading bias. That said, price is at resistance, and if the pair pulls back, look for an accompanied build in long-positions for further conviction of a near-term reversal in the pair.

See how shifts in NZD/USD retail positioning are effecting market trends- Click here to learn more about IG Client Sentiment indicators!

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Relevant Data Releases

NZD/USD Economic Docket

Other Setups in Play:

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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