NZD/USD Technical Analysis: Two-Month Resistance Exposed

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Talking Points:

• NZD/USD Technical Strategy: Flat
• Kiwi Dollar Extends Recovery, Aims to Challenge Two-Month Highs Below 0.69 Mark
• Break of Trend Line Resistance from July 2014 Hints Larger Reversal May Be Ahead

The New Zealand Dollar looks poised to challenge two-month highs against its US counterpart below the 0.69 figure having extended upward for a third consecutive day. Prices have also broken above trend line resistance capping gains since July 2014, hinting a larger reversal may be ahead.

A daily close above the 0.6884-97 area marked by the 50% Fibonacci expansion and the October 15 high opens the door for a challenge of the 61.8% level at 0.6932. Alternatively, a move back below support-turned-resistance at 0.6836, the intersection of the trend line and the 38.2% Fib, paves the way for a retest of the 23.6% expansion at 0.6777.

Risk/reward considerations argue against taking a trade at current levels. First, prices are too close to resistance to justify entering long. Second, the absence of a clear-cut bearish reversal signal suggests taking up the short side is premature. Finally, the available trading range is too narrow relative to ATR (on rolling 20-day studies).

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