NZD/USD Getting Tired

NZD/USD has been on a tear against the US Dollar since October 1st.

The New Zealand Dollar has been on a tear against the US Dollar since putting in a low on October 1st near .6220.  From that point, NZD/USD put in an inverse head and shoulders and reached the target level near .6500 on December 2nd.  The pair then proceeded to push higher through the 200 Day Moving Average near .6540 and the 61.8% Fibonacci retracement level from the July 19th highs to the  October 1st lows at .6570.  

Source: Tradingview, City Index

New Zealand’s economy is greatly affected by the Chinese growth.  The run up may have been due to high expectations that a Phase One US-China trade deal would get done before the December 13th tariffs were to be imposed.  The pair put in a high of .6635 on Friday and pulled back.  In doing so, on a daily timeframe the pair put in a shooting star candlestick formation.  This formation is indicative of a possible reversal.  In addition, the RSI was in overbought territory, which also suggests price may have been ready for a pullback. This price action has the looks of a “Buy the rumor, sell the fact” on the US-China trade deal.

Where to Now?

NZD/USD has pulled back from Friday’s highs and is currently trading near .6575.  On a shorter, 240-minute timeframe,  the pair has put in a head and shoulders formation and broken the neckline near .6600.  The target for a head and shoulders formation is the distance from the head to the neckline added to the breakdown point of the neckline.  This level is .6535, which is also near the 200 day moving average (see daily).

Source: Tradingview, City Index

Below there, there is horizontal support and a rising trendline near .6500, and then the 38.2% Fibonacci retracement of the October 1st lows to the December 13th highs at .6473.  Resistance is above at the neckline of the head and shoulders near .6600 and then the highs from December 13th at .6637. If NZD/USD does decide to continue to move higher above those resistance levels, the pair can move all the way back up to the July 19th highs at .6789 with little in the terms of resistance.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.