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NZD/USD Technical Analysis: Short Trade Setup Sought

NZD/USD Technical Analysis: Short Trade Setup Sought

Ilya Spivak,

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • New Zealand Dollar Stalls After Spiking to Six-Year Low
  • Waiting for Actionable Opportunity to Enter Short Trade

The New Zealand Dollar is struggling to maintain bearish momentum against its US counterpart after spiking to the lowest level in over six years. Prices are oscillating in a narrow range above the 23.6% Fibonacci expansion at 0.6406, with a break below this barrier on a daily closing basis initially exposing the 38.2% level at 0.6219. Alternatively, a push back above support-turned-resistance in the 0.6497-0.6521 area marked by the July 16 low and the 14.6% Fib clears the way for another challenge of the August 21 high at 0.6707.

From a tactical perspective, the absence of a clear-cut directional signal argues against committing to a long or short position at this point. Furthermore, the distance between the inner layer of near-term resistance (0.6497) and initial support (0.6406) is smaller than 20-day ATR (91 pips vs. 106 pips, respectively). This suggests the risk/reward parameters are skewed in opposition of taking a trade.

With that said, the dominant trend has firmly pointed downward since mid-2014, arguing in favor a preference for selling the pair. We will opt to remain on the sidelines for now until an actionable opportunity to do just that presents itself.

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