Forex Analysis:NZDUSD Remains Bearish Against 0.6800 Handle

Bottom line: NZDUSD long term structure continues to remain bullish against 0.5470 lows in March 2020. In the short term though, the currency has managed to carve a meaningful top around 0.6800 mark and bears might be inclined to push lower towards 0.5950 levels going forward.

 Fundamental Outlook:

NZDUSD has managed to regain some lost ground and trades around 0.6630/40 levels as we prepare to publish today’s update. The exchange rate had dropped through 0.6500 mark over the last week alongside risk assets and global equity markets. Risk aversion might return soon as investor psychology remains fragile.

USDJPY has managed to push higher towards 105.80 levels this week before finding some selling pressure. The anti-risk Japanese Yen lost some ground since the exchange rate had dropped through 104.00 lows over the last week. GBPJPY has also raised through 136.60 highs after having dropped through 133.00 handle.

SPX500 continued to push higher and managed to tough 3395 highs yesterday. Global indices including Dow Jones (+0.73%) and NASDAQ (+0.33) managed to close higher yesterday. It would be interesting to see how long the optimism continues through risk assets including Gold, Silver and Oil.

Technical Analysis:

NZDUSD is producing a potential counter trend rally, which might terminate ahead of 0.6700/20 resistance zone. Bears might remain inclined to resume lower from there and push towards 0.5950 levels in the next few weeks. Ideally 0.6800 resistance should hold well.

NZDUSD had dropped through 0.5470 lows in March 2020. Since then, bulls have remained in control and managed to produce a religious uptrend through 0.6800 mark recently. Also note that bulls have cleared past resistance around 0.6790, which calls for a corrective drop.

Further, the above rally between 0.5470 and 0.6800 seems to have unfolded as an impulse wave. Ideally, an impulse rally is followed by a corrective drop before resuming higher again. NZDUSD bears might be poised to carve a corrective drop toward 0.5950 mark going forward.

Also note that fibonacci 0.618 retracement of the above rally is seen passing through 0.5950 levels as well. Hence, probabilities remain high for a bullish bounce if prices drop to those levels going further. Bears would remain in control until prices stay below 0.6800 mark.

Most traders might remain inclined to initiate fresh short positions around 0.6700/20 resistance zone, with protective stops above 0.6800 mark and projected targets below 0.6000 mark going further. Only a push through 0.6800 would change the above bearish structure.

Prepared by

Harsh Japee, Technical Analyst.

 

NZDUSD Chart

 

Disclaimer:

This market commentary and analysis has been prepared for AT Global Markets UK Ltd (ATFX UK) by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such.

You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

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