Price & Time: NZD/USD - What to Watch For After The Fed
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- NZD/USD testing failed support zone
- Cycle convergence warns of potential counter-trend recovery
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I wrote last week that the bigger picture inflection point for NZD/USD looks to be during the 4th quarter of this year. However, there are plenty of minor cycle relationships to navigate through before then. We seem to be in one of those periods now as last week's low came right on the 161.8% time extension of the internal cycle from the key lows in 2012 and 2013. Last week also marked a fairly clear Fibonacci back count as it was 21 weeks from the July high, 62 weeks from the June 2014 high and 144 weeks from the December 2012 high. The next few days is also another harmonic time relationship related to the 2009 “Global Financial Crisis” low and the 2010 low. That cycle has proven especially important over the years as various geometric relationships from it have led to important turns in the exchange rate since 2010.
As I said last week, the Kiwi’s break of the support confluence zone between .6350 and .6425 (61.8% retracement of the 2009 – 2011 advance, the 50% retracement of the 2000 – 2011 advance and the lower parallel of a pitchfork connecting the key highs and lows of 2013 and 2014) suggests the broader risk is that NZD/USD gravitates towards the next important support cluster near .5800 - .5725 (78.6% retracement of 2009 – 2011 advance, the 61.8% retracement of the 2000 – 2011 advance, the 261.8% extension of the 2013 – 2014 range and a trendline connecting the 2001 and 2009 lows) in the medium-term. Markets tend not to go in straight lines, however, so if we are going to see a counter-trend recovery of any significance before 4Q then now is probably a decent time for it given the confluence of relationships over the past week or so.
The failed support between .6350 and .6425 now looks critical in this regard with traction above this zone needed to signal the start of a recovery of some significance. Failure to get above here within the next few days would favor a continuation lower.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com