Forex: NZD/USD Technical Analysis – Begrudgingly Passing on Long Trade
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- NZD/USD Technical Strategy: Flat
- Support: 0.8380 (trend line, 38.2% Fib exp.), 0.8254 (23.6% Fib exp.)
- Resistance: 0.8481 (50% Fib exp.), 0.8583 (61.8% Fib exp.)
Opting to wait for confirmation to enter short the New Zealand Dollar after prices produced a Shooting Star candlestick proved prudent. The currency overturned the bearish setup, pushing through resistance at 0.8380 marked by the 38.2% Fibonacci expansion and a falling trend line set from mid-October. The next layer of resistance lines up at 0.8481, the 50% Fib. Alternatively, a reversal back below 0.8380 eyes the 23.6% level at 0.8254.
From a technical and a risk/reward perspective, a long position targeting 0.8481 from current levels looks rather attractive. We will begrudgingly pass on the opportunity however. The Kiwi’s rally over the past 24 hours came in the context of a sharp improvement in risk appetite. Indeed, the correlation between NZDUSD and the S&P 500 is now at 0.86 on 20-day studies. Investors’ chipper mood followed apparent easing of tensions in the Ukraine, but the situation remains highly fluid and the threat of a sudden reversal remains high. As such, we will play it safe and stand aside.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.