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In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The New Zealand Dollar rallied more than 8% against the US Dollar since the yearly lows with the price breakout reversing off initial resistance last week. Here are the key targets & invalidation levels that matter on the NZD/USD weekly chart heading into the close of the year. 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

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Notes: In last month’s NZD/USD Weekly Technical Outlook we noted that Kiwi was testing multi-year pitchfork resistance around 6811/54 and, “a topside breach / close above this formation would suggest a more significant low is in place with such scenario targeting the 50% retracement / 52-week moving average at 6930/32.” Price registered at a high at 6969 last week before reversing sharply with weekly RSI struggling just below the 60-threshold.

Initial resistance remains steady at 6930 and is backed closely by the 200-week moving average at ~6980s – a breach / close above is needed to keep the long-bias viable with such a scenario targeting subsequent topside objectives at the 61.8% retracement at 7050 and the yearly open at 7094. Confluence weekly support rests at 6761 with broader bullish invalidation at now raised to 6632.

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

Bottom line: The breakout in NZD/USD has responded to initial resistance at 6930 and while the immediate risk remains for a pullback off these levels, the medium-term outlook remains constructive while above 6761. From a trading standpoint, we’ll favor fading weakness while above former slope resistance targeting a breakout towards yearly open resistance. I’ll publish an updated NZD/USD scalp report once we get further clarity on near-term price action.

Even the most seasoned traders need a reminder every now and then- Avoid these Mistakes in your trading

NZD/USD Trader Sentiment

NZD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short NZD/USD - the ratio stands at -1.23 (44.8% of traders are long) – weak bullish reading.
  • Long positions are 12.8% higher than yesterday and 3.0% higher from last week
  • Short positions are 17.4% higher than yesterday and 37.4% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests NZD/USD prices may continue to rise. Traders are further net-short than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger NZD/USD-bullish 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 Charts

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