NZD/USD TECHNICAL STRATEGY: SHORT AT 0.7320
- New Zealand Dollar marks a swing top following soft 4Q GDP report
- Break of support from March low hints larger downtrend back in play
- Short position re-established above 0.73, targeting 2018 range floor
The New Zealand Dollar looks vulnerable to deeper losses against its US counterpart after breaking support guiding a corrective upswing from March lows. The currency pair broke down following disappointing fourth-quarter GDP data, breaking the short-term uptrend established from the March 8 swing bottom.
A subsequent upswing allowed for an opportunity to re-enter short at 0.7320, re-establishing a position that had been stopped out at breakeven earlier in the week after some initial profit-taking. The move found follow-through, breaching the bounds of the larger upswing to hint the dominant descent is back in play.
From here, a daily close below support in the 0.7177-86 area (February 8 low, 38.2% Fibonacci retracement) opens the door for a test of the 50% level at 0.7109. Alternatively, a move back above the 23.6% Fibonacci expansion at 0.7332 exposes the 0.7428-34 zone (38.2% Fib expansion, September 20 high).
The reconstituted short position initially targets 0.7186, with a stop-loss to be triggered on a daily close above 0.7322. A heavy dose of incoming event risk by way of the FOMC and RBNZ monetary policy announcements looks set to drive volatility and might catalyst the next leg downward.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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