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NZD/USD Technical Strategy: NEUTRAL

  • Sharp Kiwi Dollar drop hints at Triple Top in place below 0.70
  • Bearish reversal confirmation needs breach of 4-month support
  • Risk/reward needs likely put actionable short entry below 0.67

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The New Zealand Dollar turned sharply lower against its US counterpart, establishing the outlines of a triple top in the 0.6939-69 area (as expected). However, final confirmation of a larger reversal still needs a break below rising trend support guiding prices higher from early October 2018 lows.

That level is now at 0.6752, immediately followed by another support band in the 0.6686-0.6721 zone. In practice, maintaining acceptable risk/reward parameters seem likely to mean that waiting for the latter threshold to be breached on a daily closing basis to make for an actionable short trade setup.

On balance, this probably means that in practice, a break below the 0.67 figure will be needed for both appropriate confirmation as well as acceptable risk/reward parameters to enter a short position. The next layer of support beyond that looks to be in the 0.6591-0.6619 region.

New Zealand Dollar vs US Dollar chart - daily

Alternatively, an upside reversal that takes the currency pair above 0.6969 in a convincing way would neutralize near-term selling pressure and put the January high at 0.7060 in focus. This relatively minor hurdle is followed by a sturdier one in the 0.7174-88 region, marked by former range support.

NZD/USD TRADING RESOURCES:

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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