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NZD/USD Technical Outlook: Price Reversal Targeting Trend Support

NZD/USD Technical Outlook: Price Reversal Targeting Trend Support

2018-12-12 18:30:00
Michael Boutros, Technical Strategist
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The New Zealand Dollar has fallen more than 1.7% off the monthly highs with the pullback now targeting broader up-trend support. These 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 latest NZD/USD Weekly Technical Outlook we noted that price had, “responded to initial resistance at 6930 and while the immediate risk remains for a pullback off these levels, the medium-term outlook remains constructive.” Price is threatening a break below confluence support today around 6850 where the May low converges on the 200-day moving average – a close below this level would risk a deeper correction towards the median-line. Note that an RSI support trigger has already broken & offered resistance and further highlights the near-term threat.

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NZD/USD 240min Price Chart

NZD/USD Price Chart - 240min

Notes: A closer look at Kiwi price action highlights last week’s reversal off pitchfork resistance with the decline trading within a near-term descending channel off the highs. The immediate threat is lower while below the highlighted slope confluence around ~6890s with near-term bearish invalidation at the monthly open at 6915. Confluence support rests at 6810 backed closely by the 100% extension at 6783 and the 38.2% retracement at 6761 – both levels of interest for possible exhaustion / long-entries IF reached.

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Bottom line: NZD/USD has responded to uptrend resistance and while the immediate threat is lower, ultimately the pullback may offer more favorable long-entries. From a trading standpoint, I’m targeting the median-line on this drop and we’ll be looking for reaction there for guidance. IF this pullback has deeper intentions, near-term advances should be capped by channel resistance.

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 Positioning
  • A summary of IG Client Sentiment shows traders are net-short NZD/USD - the ratio stands at -1.32 (43.1% of traders are long) – weak bullishreading
  • Long positions are12.6% lower than yesterday and 5.4% higher from last week
  • Short positions are 7.1% lower than yesterday and 8.3% 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 NZDUSD-bullish contrarian 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

https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/scalping_report/2018/11/23/AUDUSD-Outlook-Aussie-Searches-for-Support-after-Failed-Breakout-Australian-Dollar-Technical-Price-Chart-Forecast-MBCS.html?ref-author=Boutros

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