Bottom line: NZDUSD medium term outlook remains bullish against 0.5470 lows. The currency might have carved an intermediary top just below 0.6600 levels. A drop below 0.6400 would be encouraging to bears, going forward.

Fundamental Outlook:

NZDUSD has rallied since the beginning of this week from close to 0.6400 lows. The exchange rate has risen to 0.6490, almost a 100 pips. NZDUSD has indeed a strong correlation to risk assets and has been taking cues from Global Indices over the week. With a reversal in risk appetite, NZDUSD might come under pressure and break below 0.6400.

USDJPY had hit 108.16 levels before drifting lower again yesterday. The exchange rate is set for volatile movement as NFP is set to release today around 0830 AM EST. The USDJPY might gain further as Unemployment rate is projected at 12.3% versus 13.3%. It would be interesting to see the overall effect, since Japanese Yen is also anti-risk and tends to rise with fading risk appetite.

SPX500 has risen over +3.25% since the beginning of the week, and closed at 3111 yesterday. Futures are trading higher around 3120 as we prepare to publish. A boost in the ISM manufacturing numbers (52.6 against 49.5 projected), might have added to the rally yesterday. With the rising COVID-19 infections and US-China tensions, it might just be a matter of time before risk sentiment gives in.

Technical Analysis:

NZDUSD has remained in control of bulls since 0.5470 lows in March 2020. The currency might have hit resistance around 0.6580/90 levels recently and bears could be inclined to take control back from here. A drop below 0.6400 interim support would confirm that a meaningful top is in place.

NZDUSD has been lagging behind its counter-part AUDUSD, which has managed to take out meaningful resistance at 0.7032. NZDUSD is facing strong resistance around 0.6740 levels and a break above 0.6600 is required to confirm further upside.

NZDUSD has been struck in a sideways consolidation since June 09, 2020 and should produce a breakout to decide the next major move. Traders might be willing to initiate fresh short positions on a break below 0.6400 levels, against 0.6600 resistance.

Prepared by

Harsh Japee, Technical Analyst.

NZDUSD Chart

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