NZD/USD Price Analysis: Kiwi Testing Support at Fresh Yearly Lows

2018-06-21 16:44:00

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NZD/USD Daily Price Chart
NZD/USD 120min Price Chart
NZD/USD IG Client Positioning
Relevant NZD/USD Data Releases
Other Setups in Play

NZD/USD responding to near-term support; risk for larger recovery
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The New Zealand Dollar has fallen more than 3% from the monthly highs with a break of the June opening-range shifting the focus toward a late-month low in NZD/USD. That said, the decline failed to hold a break below the May lows with a rebound off confluence support threatening a larger recovery in in price. These are the updated targets & invalidations levels that matter for NZD/USD in the near-term.

NZD/USD Daily Price Chart

Technical Outlook: In this week’s Technical Perspective on the New Zealand Dollar, we highlighted the breakdown in Kiwi while noting that, “price is now approaching levels support targets of interest that could interrupt this decline in the near-term.” The first region is defined by 6811/28 where the 2016 open and the 2017 low-day close converge on the 50-line of the descending pitchfork formation extending off the 2017 & 2018 highs- price is responding to this threshold today.

Daily resistance stands at the highlighted trendline confluence around ~6940s with bearish invalidation up at the monthly open at 6999- a breach there would be needed to suggest a more significant low is in place for NZD/USD. A downside break / daily close below this support zone targets subsequent objectives at the 2017 lows at 6780 backed by the 61.8% retracement of the 2015 advance at 6716.

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NZD/USD 120min Price Chart

Notes: A closer look at NZD/USD price action highlights today’s reversal off support with the advance now eyeing initial resistance at the 23.6% retracement at 6881. IF Kiwi is heading higher, look for support to hold ahead of the May lows at 6850 with a topside breach targeting subsequent resistance objectives at 6915/20 and 6944 (area of interest for possible exhaustion if reached).

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Bottom line: The near-term risk is for a larger recovery on this rebound with our focus higher while above 6850. Ultimately a larger recovery should offer more favorable short entries near structural resistance. From a trading standpoint, I’ll favor fading weakness while above today’s low targeting a move back towards former the underside of the May trendline. Keep in mind the RBNZ (Reserve Bank of New Zealand) interest rate decision is on tap next week alongside an uptick in key US data releases.

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NZD/USD IG Client Positioning

A summary of IG Client Sentiment shows traders are net-long NZD/USD- the ratio stands at +1.99 (66.5% of traders are long) –bearishreading
Traders have remained net-long since April 22nd; price has moved 6.7% lower since then
Long positions are 6.7% higher than yesterday and 1.7% higher from last week
Short positions are7.9% higher than yesterday and 29.8% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Yet traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed NZD/USD trading bias from a sentiment standpoint.

See how shifts in NZD/USD retail positioning are impacting trend- Learn more about sentiment!

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