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NZD/USD Price Outlook: Kiwi Carries Breakout Potential

NZD/USD Price Outlook: Kiwi Carries Breakout Potential

2018-10-29 19:30:00
Michael Boutros, Technical Strategist
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The New Zealand Dollar has continued to trade just below multi-month slope resistance with the initial October opening-range in focus heading into the close. Here are the updated targets and invalidation levels that matter on the NZD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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NZD/USD Daily Price Chart

NZD/USD Daily Price Chart

Technical Outlook: In my Weekly Technical Outlook on the New Zealand Dollar, our ‘bottom line’ noted that Kiwi was, “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.” Kiwi registered a low at 6424 just two days later before reversing sharply back toward the upper parallel of the pitchfork formation we’ve been tracking off the yearly highs.

Despite the volatility, NZD/USD continues to trade within the confines of the October opening-range and we’ll be looking for the break to offer further guidance on our medium-term directional bias. Critical daily support rests at 6453/65 – a region defined by the 2015 low-week close, the yearly low-day close and the 78.6% retracement of the October advance. A topside breach of the descending pitchfork is needed to suggest a more significant low is in place.

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NZD/USD 240min Price Chart

NZD/USD 240min Price Chart

Notes: I’m working with a slightly different slope on the intraday chart but the same levels are reflected. Looking for support ahead of 6496 if price is indeed heading higher. Near-term resistance stands at 6555 backed by 6595 with a breach above 6624/40 needed fuel the next leg higher. Weakness sub-6453 would risk considerable losses with subsequent support targets seen at the yearly low at 6424 and the 2016 low at 6347.

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Bottom line: The immediate range in focus heading into the close of the month is 6453-6640 – look for the break for guidance. From a trading standpoint, I’ll favor fading weakness while within this near-term structure ultimately targeting a breach of this multi-month descending formation. Look for an early-week low near the lower parallel IF this is going to work. We’re light on Kiwi data this week with lots of US event risk on tap- ending with Non-Farm Payrolls on Friday. Tread lightly here into the monthly open.

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

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 +1.67 (62.5% of traders are long) – bearishreading
  • Traders have remained net-long since September 20th; price has moved 0.3% lower since then
  • Long positions are5.8% higher than yesterday and 2.9% lower from last week
  • Short positions are 2.3% lower than yesterday and 1.8% 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. However, traders are more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed NZDUSD 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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- 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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