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New Zealand Dollar Price Outlook: Kiwi Plunges Through Support

New Zealand Dollar Price Outlook: Kiwi Plunges Through Support

2020-02-28 15:00:00
Michael Boutros, Strategist
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New Zealand Dollar Technical Price Outlook: NZD/USD Weekly Trade Levels

The New Zealand Dollar is the worst performing currency against the US Dollar among the USD Majors with Kiwi breaking below multi-year slope support into the close of February trade. Growing concerns about the Coronavirus have continued to weigh on market sentiment with stocks posting the largest single-day drop in history yesterday – accordingly, the currency comm bloc has remained under pressure. These are the updated targets and invalidation levels that matter on the NZD/USD weekly price chart. Review my latest Strategy Webinar for an in-depth breakdown of this Kiwitrade setup and more.

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New Zealand Dollar Price Chart – NZD/USD Weekly

New Zealand Dollar Price Chart - NZD/USD Weekly - Kiwi Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; NZD/USD on Tradingview

Notes: In my last New Zealand Dollar Weekly Price Outlook we noted that Kiwi had reversed off, “long-term down-trend resistance and the immediate focus is on this pullback.” A sustained decline off that high has fueled a loss of more than 7.5% year-to-date with Kiwi posting just one weekly advance since the start of 2019.

This week’s sell-off takes NZD/USD below confluence support at 6314/22 - a region defined by the 2019 low-week close and the 78.6% retracement of the September advance. Note that the lower parallel of the ascending pitchfork formation also converges on this zone and further highlights the technical significance of this break- look for resistance there now with a break lower from here exposing the 1.618% extension / 2015 & 2019 lows at (6197-6204). A close below is needed to fuel the next leg lower in the New Zealand Dollar with such a scenario eyeing subsequent support objectives at 6023 and the 2006 low at 5928. Broader bearish invalidation steady at the 2018 low close at 6436.

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Bottom line: The New Zealand Dollar has broken below confluence support and leaves the risk weighted to the downside in NZD/USD while below this week’s high. From a trading standpoint, a good idea to reduce short-exposure / lower protective stop on a test of the 62-handle – look for a reaction there for guidance IF reached with close below needed to keep the immediate short-bias viable. I’ll publish an updated New Zealand Dollar Price Outlook once we get further clarity on the near-term NZD/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

New Zealand Dollar Trader Sentiment – NZD/USD Price Chart

New Zealand Dollar Trader Sentiment - NZD/USD Price Chart - Kiwi Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long NZD/USD - the ratio stands at +2.65 (72.61% of traders are long) – bearish reading
  • Long positions are5.38% lower than yesterday and 2.93% higher from last week
  • Short positions are 11.52% lower than yesterday and 33.64% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger NZD/USD-bearish contrarian trading bias from a sentiment standpoint.
NZD/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -1% -1% -1%
Weekly -9% -30% -23%
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Key New Zealand / US Economic Releases

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Previous Weekly Technical Charts

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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