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Talking Points:
- NZD/USD Technical Strategy: Flat
- New Zealand Dollar drops to range floor after rejection near 0.68 figure
- Prices too close to support to justify entering short on risk/reward grounds
The New Zealand Dollar recoiled sharply lower from resistance below the 0.68 figure against its US counterpart, putting in the largest daily drop in two weeks. Prices gapped to the bottom of the monthly congestion range after a round of disappointing data fueled RBNZ rate cut bets.
A daily close below the 38.2% Fibonacci expansion at 0.6570 opens the door for a challenge of the 50% level at 0.6507. Alternatively, a turn above the 23.6% Fib at 0.6648 clears the way for a test of falling trend line resistance at 0.6716.
The dominant NZD/USD trend continues to favor the downside, which our 2016 fundamental forecast envisions will continue. Prices are too close to near-term support to justify entering short from a risk/reward perspective however. As such, we will remain on the sidelines and wait for a more compelling opportunity to emerge.
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