NZD/USD Testing Key Resistance Barrier Ahead of FOMC, New Zealand GDP
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- Kiwi approaching critical resistance- rally vulnerable near-term while below 7400
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Technical Outlook: We noted that NZDUSD was testing confluence support late-last month at the 200-day moving average with the subsequent rebound now approaching key near-term resistance at 7390/95. This region is defined by the 61.8% retracement of the July decline & the 100% ext of the September advance and converge on a pair of parallels today (technically significant level).
Notes:A closer look at price action sees Kiwi trading within the confines of an ascending channel formation with the near-term slope resistance further highlighting this resistance range just head of the 74-handle. Interim support rests with the weekly opening-range high at 7345 with a break sub 7247 / channel support needed to shift the focus lower again.
Bottom line: the long-side is vulnerable heading into this resistance region and we’ll be looking for a reaction off that mark as we head into today’s FOMC interest rate decision and New Zealand 2Q GDP figures later this afternoon. From a trading standpoint. I’d be looking to fade strength (sell-rallies) while below this resistance threshold. That said, a breach higher from here invalidates the reversal play with such a scenario targeting the 2016 high-day close at 7450 and another significant Fibonacci confluence region at 7515/17.
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- A summary of IG Client Sentiment shows traders are net-short NZDUSD- the ratio stands at -1.02 (49.6% of traders are long) – weakbullishreading
- Long positions are 13.0% lower than yesterday and 17.0% lower from last week
- Short positions are 5.3% higher than yesterday and unchanged from last week.
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZDUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger bullish contrarian trading bias from a sentiment standpoint.
See how shifts in retail positioning are impacting NZDUSD price trends- Click here to learn more about sentiment!
Relevant Data Releases
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- Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.