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Price Action Approach Major Support -by Ecork

Analysis of NZD / USD (Kiwi)

  • Deteriorating US fundamentals highlight potential reversal in NZD/USD
  • NZD/USD price action is approaching a key long-term area, considering and discussing multiple scenarios
  • US data including GDP and final PCE data for the first quarter are dominated by scheduled risk events

The NZD/USD has been suppressing for a while now but is approaching a major support level (0.6200) again. This presents an intriguing dilemma for a potential crash bounce. Cartographers will tell you that the more frequently a level is tested and respected, the more likely it is to spoil it in the end. So far, the pair has approached 0.6200 and 61.8%. vibe The main move is in March 2020 without the bearish momentum continuing.

Key factors supporting another bounce off the 0.6200 level include supportive monetary policy for China amid sporadic closings and slower growth. However, the IMF expects China to recover faster than the US until 2023 which bodes well for New Zealand since China is New Zealand’s largest trading partner. Looking at the US dollar, we have already seen lower yields and it appears that market expectations around the Fed’s final interest rate peaked last week, around 4%. In terms of earnings expectations, slowing growth and waning consumer confidence in the US could weaken the dollar as recession fears gain momentum. the closest resistance Shown at 0.6395 if we were to see a price drop rejection around the key the support.

However, if the US dollar data moderates, lowering market expectations of a near-term recession, the current downtrend may continue. In the event of a breakout of 0.6200, support comes along the way at 0.5915 – which corresponds to the major pivot point of 2004 and 2006.

New Zealand dollar / US dollar daily chart

Source: TradingView, prepared by Richard Snow

Monthly chart highlights key step for 2020 and beyond Fibonacci levels. The 61.8% Fibonacci level appears along with the long-term pivot point around 0.6200, which is a rather important point. support area.

New Zealand dollar / US dollar monthly chart

NZD/USD Technical Setup: Price Action Approach Key Support

Source: TradingView, prepared by Richard Snow

New Zealand dollar / US dollar:Retailer data show 65.55% of traders are net long With the ratio of buy-to-sell traders at 1.90 to 1.

We usually take a view opposing the crowd’s sentimentsAnd the reality of traders suggests the long net New Zealand dollar/ The price of the US dollar may continue to decline.

The number of long traders is up 3.63% from yesterday and down by 0.63% from last week, while the number of short traders is 12.70% lower than yesterday and 14.58% higher than last week.

Positioning is longer net than yesterday but less net buy than last week. The A combination of current sentiment and recent changes gives us a mixed view of NZD/USD trading.

The Reserve Bank of New Zealand (RBZN) is still expected to raise rates fairly aggressively, continuing on July 13.The tenth As 50 basis points are currently priced by the markets. Markets are currently seeing just under 200bps of further tightening in the year which should put the rate target at 4%.

Implied market odds of the NZD target price

NZD/USD Technical Setup: Price Action Approach Key Support

Source: Refinitiv

Major risk events in the next seven days

The US dominates the scheduled risk events in the coming days. Next week we see the US GDP which will likely confirm the first quarter contraction. Growth is a major concern at the moment as the Fed appears to be preparing to rally strongly despite warnings about the state of the consumer and slowing economic growth. Then next Thursday we have the PCE data – something that Jerome Powell mentioned still has a fair way to go despite the slight easing in recent publications.

NZD/USD Technical Setup: Price Action Approach Key Support

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Written by Richard Snow for DailyFX.com

Connect with Richard and follow him on Twitter: Tweet embednowFX

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