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Kiwi Price Outlook: New Zealand Dollar Counter-Offensive, First Test

Kiwi Price Outlook: New Zealand Dollar Counter-Offensive, First Test

2019-06-18 17:00:00
Michael Boutros, Strategist
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The New Zealand Dollar is the worst performer year-to-date against the US Dollar with NZD/USD down more than 2.8%. A test of the May lows held last week with the recovery now eyeing near-term resistance. These are the updated targets and invalidation levels that matter on the NZD/USD charts heading in to tomorrow’s FOMC interest rate decision. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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Kiwi Price Chart - NZD/USD Daily

NZD/USD Price Chart - Kiwi Daily - New Zealand Dollar vs US Dollar Outlook

Technical Outlook: In my latest New Zealand Dollar Weekly Price Outlook we noted that Kiwi had, “broken the monthly opening-range lows with the decline taking price into weekly support – risk remains for possible downside exhaustion.” Price turned just pips from the 88.6% retracement of the 2018 advance at 6487 with the subsequent rebound now targeting monthly open resistance at 6528.

A breach / close above the median-line is needed to suggest a larger recovery is underway targeting the 61.8% retracement at 6558 and the April lows at 6580. Broader bearish invalidation stands with the upper parallel. A break lower from here would mark resumption of the March downtrend targeting the 2018 low-day close at 6455 & the 2018 low at 6424.

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Kiwi Price Chart - NZD/USD 120min

NZD/USD Price Chart - Kiwi 120min - New Zealand Dollar vs US Dollar Outlook

Notes: A closer look at Kiwi price action shows NZD/USD trading within the confines of a descending pitchfork formation extending off the June highs with the 75% line further highlighting near-term resistance at 6528/34 – look for a reaction there. A topside breach keeps the focus on the upper parallel / 6558 – area of interest for near-term price exhaustion. Failure to break this zone would shift the focus back towards the

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Bottom line: The Kiwi recovery is now approaching initial resistance targets at 6528/33 and ultimately a topside breach of this formation is needed suggest a more significant low is in place. From a trading standpoint, look to reduce long-exposure / raise protective stops on a move into this resistance zone - risk for near-term exhaustion but IF price is heading higher, losses should be limited to the weekly open. A break of the weekly opening-range lows would keep the focus on 6455.

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

Kiwi Trader Sentiment - NZD/USD Positioning - New Zealand Dollar vs US Dollar Price Chart
  • A summary of IG Client Sentiment shows traders are net-long NZD/USD - the ratio stands at +4.02 (80.1% of traders are long) – bearish reading
  • Traders have remained net-long since April 2nd; price has moved 5.3% lower since then
  • Long positions are 7.4% higher than yesterday and 32.0% higher from last week
  • Short positions are 1.6% higher than yesterday and 32.1% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Kiwi prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment 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!

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New Zealand / US Data Releases - Economic Calendar

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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