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New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

Daniel Moss, Analyst

New Zealand Dollar, NZD/USD, NZD/JPY, NZD/CHF, NZD Technical Analysis – Talking Points:

  • New Zealand Dollar poised to extend its climb higher as cycle analysis suggests a rotation upturn is afoot.
  • Ascending Channel continuing to caress NZD/USD rates higher.
  • 2014 downtrend stifling NZD/JPY buyers.
  • NZD/CHF coiling up just below key resistance. Is a topside break on the cards?

The New Zealand Dollar’s 24% surge from the lows of March may prove to be the start of a prolonged period of strength against its US Dollar counterpart, as the break above long-term trend resistance hints a cyclical upturn is afoot.

NZD/USD Monthly Chart – Cyclical Upturn Afoot?

New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

NZD/USD monthly chart created using TradingView

The chart above highlights the cyclical nature seen in NZD/USD rates over the past 26 years, with the currency pair largely adhering to what appears to be an 8-year rotation. It has set significant bottoms in late 2000, early 2009 and mid-2015.

Bullish RSI divergence in late 2000 seemed to signal the end of the New Zealand Dollar’s five-year decline from the November 1996 high (0.7147) and triggered a shift in overall market sentiment, as price surged over 110% to eventually peak in February 2009 (0.8214).

Recent price action is strikingly similar to that seen early in the bullish cycle ignited in October 2000 and could be indicative of further upside for NZD/USD, if price remains constructively positioned above the downtrend extending from the 2014 high (0.8836) and is able to clear key resistance at the 38.2% Fibonacci resistance (0.6755).

To that end, the trade sensitive currency could be poised to substantially extend its recent 24% surge against its haven-associated counterpart, with cycle analysis suggesting NZD/USD rates may rise as much as 45% from current levels to eventually peak in late 2028.

Of course, this is hardly a given when taking into account the uncertainty of the global economic outlook and the ultra-dovish stance of the Reserve Bank of New Zealand.

Nevertheless, investors should continue to monitor long-term developments, as a monthly close above the 38.2% Fibonacci (0.6755) could generate a sustained climb back towards the 2017 high (0.7558).

NZD/USD Daily Chart – Ascending Channel Caressing Price Higher

New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

NZD/USD daily chart created using TradingView

As noted in previous reports, bearish RSI divergence at the July 2019 high (0.6790) suggested that NZD/USD rates were at risk of a short-term pullback after pressing to set a fresh yearly high on September 2 (0.6789).

Having said that, with price constructively positioned above the 21-, 50- and 200-day moving averages and continuing to track within the confines of an Ascending Channel, the path of least resistance remains skewed to the upside.

Therefore, the recent 2.7% slide from the monthly high may prove to be a mere counter-trend correction, as price scampers away from support at the 21-DMA (0.6655) and begins to retest key resistance at the yearly open (0.6733).

A daily close above psychological resistance at the 0.68 level would probably generate a push to retest the September high (0.6789) and could signal the resumption of the primary uptrend.

Conversely, failure to overcome resistance at the yearly open could result in a correction back towards confluent support at the July high daily close (0.6625) and Ascending Channel support.

NZD/JPY Daily Chart – 2014 Downtrend Capping Upside Potential

New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

NZD/JPY daily chart created using TradingView

In a similar fashion to its NZD/USD counterpart, NZD/JPY rates look poised to extend their climb back towards the monthly high (71.98) after finding mobile support at the trend-defining 50-day moving average (70.19).

With the RSI and MACD indicators continuing to track above their respective neutral midpoints and price constructively positioned above key psychological support at the 70.00 mark, a continuation of the uptrend from the March low (59.49) looks on the cards.

However, the 2014 downtrend and January gap continue to stifle buying pressure and could encourage would-be sellers to drive price back towards the uptrend extending from the March lows, if support at the 50-DMA (70.19) fails to stifle bearish momentum.

That being said, an extension of the recent climb from the August low (68.76) seems to be the more likely scenario, with a daily close back above the 71.00 level potentially igniting a surge to fill in the January breakaway gap (72.18) and bringing the yearly high (73.35) into play.

NZD/CHF Daily Chart – Coiling Up Below Key Resistance

New Zealand Dollar Time Cycle: NZD/USD, NZD/JPY, NZD/CHF Key Levels

NZD/CHF daily chart created using TradingView

The NZD/CHF exchange rate appears to be coiling up just below sentiment-defining resistance at the 200-DMA (0.6115), after failing to break above the downtrend extending from the 2019 high (0.6922).

Although price has fallen 2.37% since setting the monthly high on September 2 (0.6186), a push back above the 50% Fibonacci (0.6112)) to test the July high (0.6226) could eventuate in the coming weeks, as the RSI indicator remains perched above 50 and in bullish territory.

Moreover, the 21- and 50-DMA’s may continue to guide price higher and could encourage would-be buyers if price is able to hurdle psychological resistance at the 0.61 level.

A daily close above confluent resistance at the September high (0.6186) and 2019 downtrend would probably validate bullish potential and carve a path for price to test the 61.8% Fibonacci (0.6302).

On the other hand, failure to break above psychological resistance could be indicative of fading bullish momentum and may result in price falling back below the monthly low towards support at the 38.2% Fibonacci (0.5919).

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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

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