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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The New Zealand Dollar is trading into a critical technical support zone early in the month / quarter and our immediate focus is on a reaction off this threshold. Here are the key targets & invalidation levels that matter on the NZD/USD weekly chart.Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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NZD/USD Weekly Price Chart

NZD/USD Price Chart - Weekly

Notes: We’ve been tracking this descending pitchfork formation extending off the 2017 / 2018 highs in NZD/USD for months now and in out last technical update we noted that a break below the 61.8% retracement at 6717 would shift the focus towards targets at, “the median-line (currently around ~6580s) backed by the 78.6% retracement / 2015 low-week close at 6453/88- look for a larger reaction there IF reached.” Kiwi is testing this key support zone this week.

Note that the median-line now converges on this support zone and further highlights its technical significance. A break below this level would risk accelerated losses with such a scenario exposing the 2016 low at 6347 backed by the 1.618% extension at 6182. Weekly resistance now stands back at 6717 with broader bearish invalidation lowered to the upper parallel / 6854.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line:The New Zealand Dollar is trading just above key confluence support at 6453/88 and IF prices are going to post some sort of near-term recovery this would be the spot. That said, its decision time for Kiwi. From a trading standpoint, a region to be reducing / closing short exposure and lowering protective stops. We’ll be tracking near-term price action for possible signs of exhaustion as we close out the week. Keep in mind we’re just now beginning to carve out the October opening range with US Non-Farm Payrolls (NFP) on tap tomorrow.

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NZD/USD Trader Sentiment

NZD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long NZD/USD - the ratio stands at +3.19 (76.1% of traders are long) – bearish reading
  • Traders have remained net-long since September 20th; price has moved 1.9% lower since then
  • Long positions are11.9% higher than yesterday and 21.5% higher from last week
  • Short positions are 37.1% lower than yesterday and 22.0% 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger NZD/USD-bearish contrarian trading bias from a sentiment standpoint.

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

Relevant NZD/USD Data Releases

NZD/USD Economic Calendar

Economic Calendar– for the latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Previous Weekly Technical Perspectives

Learn how to Trade with Confidence in our Free Trading Guide

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

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