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Talking Points
- NZD/USD embarks on important test
- .6785 and .6515 look critical heading into the RBNZ
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NZD/USD: Moment of Truth Awaits
The rebound in NZD/USD from the mid-November turn window was pretty remarkable. As noted on November 16th, the period marked a convergence of a 1,570 calendar day Armstrong Pi cycle from the 2011 post float all-time high, the 38% retracement in time of the year-to-date range and the 38% retracement of the time elapsed between the 2Q high close and the year’s low close. The price level from where the Kiwi turned was almost equally significant as it occurred from just a few pips above the 61.8% retracement of the 2009 – 2011 advance, which lead to a 5.5% rally over the next couple of weeks.
So what now? As a cyclical analyst, determining the duration of a move is always difficult and I am genuinely torn here. The timing at the mid-November low was certainly important enough to mark the start of something significant to the upside, but a move of 5.5% could also be all we get. The RBNZ this week looks to be a clear catalyst for directional clarity especially with the market pretty evenly split (3-month bills implying a little less than 50% chance for a cut) on what they might do. Split markets mean half will be wrong providing plenty of fuel for a move. The levels in spot are fairly clear heading into the RBNZ with a close over .6785 needed to re-instill the upside initiative to the Bird. Weakness under .6515 would warn the advance in NZD/USD has lost its way while a close under .6430 would completely invalidate the positive timing from last month.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX
