Kiwi dollar suffered significant decline after the failure to break 0.87 round number. This decline is surprising that the major risk trends is obvious upward through global stock indices managed to climb higher. Some will say that USD will strengthen due to inflows as foreign investors are attracted to US stocks hit record once again. But the story is not visible strengthening USD via EUR / USD and GBP / USD. AUD / USD has the lowest trade but that seems to be fallout from NZD / USD affecting its neighbor rather than a case of USD pulling everyone down.
It should also be noted that the decline in NZD / USD has continued with great fervor during the Asian session today, when every other major currency pairs were trading higher against USD or at least stabilized. Therefore, it is reasonable to say that NZD / USD is moving by its own inherent bearishness. The reason for this downward trend may be due to the saturation of bullish positions on the NZD / USD. This is not surprising as going long on NZD was a trade right before the beginning of 2014 as RBNZ central bank said explicitly that they will be touring throughout 2014 - 2015 rate expectations unchanged but as market participants took such a long time to load long positions, it is likely that those who are optimistic have reached their limits and purchase what we see is essentially profit-taking activities before the next bullish wave.
timetable
This would mean that the overall upward momentum is expected to remain intact. Therefore, the probability of 0.859 holding support increases. Stochastic readings are also heavily oversold right now, in favor of a bullish reversal move. However, if prices fail to break the resistance around 0862 (swing high on March 26), then it is likely that the immediate momentum is still bearish and we may see selling more to .853 to .856 before consolidation bulls are starting to buy in NZD / USD once again.
Daily chart
daily chart agrees with the bearish scenario in prices seems to have broken the rising trend line and the round number of 0.86. stochastic indicator on the daily chart is in agreement, indicating that the bearish cycle is underway. However, it is unlikely that prices will be able to break the 0.85 needed to invalidate current bullish breakout as the bear market may be oversold in the region when this happens. This is consistent with our analysis above who claim that the decline in NZD / USD at the moment is just a temporary setback while wise direction we should still expect NZD / USD to be bullish.
It is also important to note the current trend of bullish data stream that is still in play, there is a chance that prices may begin to reverse more without even test 0,850 round number. As such, traders who want to short NZD / USD should cost 0.859 breaks will need to be aware of this and adjust the risk / position size accordingly.
On a side note, there are comments that believes that the first Minster Key said this morning regarding tax audits to weaken NZD is an important contributor to the decline yesterday. But savvy traders would immediately noticed that prices have started to decline well before Key began his speech, and also it is generally difficult for a government / central bank to influence a currency float freely, unless the market is favorable to the movement . As such,
Links:
WTI Crude - staying above 100.0 After yesterday the Sell-Off
S & P 500 - Weak Fundamentals? Market cares As Achieved record
AUD / USD - Aussie Unable to hold gains after RBA rate decision
This item is for for general information only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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Read More : NZD/USD Technicals – Sharp Decline But Bull Trend Intact
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