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Weekly Technical Perspective on the New Zealand Dollar (NZD/USD)

Weekly Technical Perspective on the New Zealand Dollar (NZD/USD)

Michael Boutros, Strategist

In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The New Zealand Dollar is down more than 3% year-to-date with price breaking below confluence support this week. While the risk remains lower, the pair is approaching key swing lows that could limit the decline in the days ahead. Here are the key levels that matter on the NZD/USD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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NZD/USD Weekly Price Chart

NZD/USD Weekly Price Chart

Notes: We’ve been tracking this decline in NZD/USD since April with the subsequent break below the yearly opening range / yearly open, confirming a broader reversal in price. Kiwi is attempting to break below support at 6921 where the 78.6% retracement converges on the 2016 trendline - failure to close the week below this region would leave the bears vulnerable to a rebound in price. That said, price is now approaching levels support targets of interest that could interrupt this decline in the near-term.

The yearly lows come in at 6851 with confluence support seen juts lower at 6780-6811. This region is defined by the 2017 low-day close / swing low and converges on the 50-line of a broad descending pitchfork formation extending off the 2011 and 2014 highs. A break / weekly close below this key threshold would be needed to fuel the next ‘leg’ lower in Kiwi targeting 6717 and the 100% Fibonacci extension at 6659.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: The risk is lower in the New Zealand Dollar while below weekly reversal resistance at 6942 with broader bearish invalidation steady at the yearly open at 7094. From a trading standpoint, look to trim short exposure as we approach the yearly lows – IF this support break is legit, NZD/USD advances should be capped by former trendline support (red). Ultimately, I’ll be looking for exhaustion / possible long-entries lower on a move into confluence support to play the recovery. Keep in mind we have the release of New Zealand GDP figures tonight with the RBNZ interest rate decision on tap next week.

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NZD/USD IG Client Positioning

NZD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long NZD/USD- the ratio stands at +1.83 (64.7% of traders are long) –bearishreading
  • Traders have remained net-long since April 22nd; price has moved 6.6% lower since then
  • Long positions are 6.8% higher than yesterday and 6.8% lower from last week
  • Short positions are13.3% higher than yesterday and 14.9% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. However, traders are less net-long than yesterday but more net-long from last week andthe combination of current positioning and recent changes gives us a further mixed NZD/USD trading bias, from a sentiment standpoint.

See how shifts in NZD/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant NZD/USD Data Releases

NZD/USD Economic Calendar

Economic Calendar– for the latest economic developments and upcoming event risk

Previous Weekly Technical Perspectives

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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