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NZD/USD Technical Analysis: A Top in Place Below 0.73?

NZD/USD Technical Analysis: A Top in Place Below 0.73?

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar appears to have topped below 0.73 figure vs. US counterpart
  • Risk/reward considerations argue against taking up a short trade for now

The New Zealand Dollar appears to have established an interim top against its US namesake after prices put in a Bearish Engulfing candlestick pattern below the 0.73 figure. The sentiment-linked currency plunged amidrisk aversion triggered in the aftermath of the UK “Brexit” referendum.

A daily close below the 50% Fibonacci retracement at 0.6986 opens the door for a challenge of the 61.8% level at 0.6913. Alternatively, a reversal back above the 38.2% Fib at 0.7060 clears the way for a test of the 23.6% retracement at 0.7150.

It seems tempting to enter a short NZD/USD position. The available trading range is too narrow relative to ATR-measured volatility however, arguing against taking the trade on risk/reward grounds. With that in mind, it seems most attractive to remain flat for now until an actionable setup can be identified.

Losing money trading NZD/USD? This may be why.

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