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Talking Points:
- NZD/USD Technical Strategy: Flat
- Support: 0.8480-0.8513 (38% Fib ret., Oct 22 close), 0.8398 (50% Fib ret.)
- Resistance: 0.8581 (channel floor, 23.6% Fib ret.), 0.8675 (Apr’13 high)
The New Zealand declined as expected against its US counterpart after putting in a bearish Dark Cloud Cover candlestick pattern. A break below support at 0.8581, the intersection of the 23.6% Fibonacci retracement and a rising channel floor, has exposed the 0.8480-0.8513 area marked by the October 22 close and the 38.2% level. Pushing further below that aims for the 50% Fib at 0.8398. Alternatively, a reversal back above 0.8581 targets the April 2013 top at 0.8675.
Risk/reward considerations allow for a short trade at current levels but we will tactically opt against taking a position. Most of the world’s financial markets will be closed through Monday, April 21 for the Easter holiday. That means downside follow-through is likely to be limited amid thin liquidity conditions before an RBNZ policy announcement on April 23, where markets are pricing in a 97 percent probability of a rate hike. With that in mind, we will remain flat.
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Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for DailyFX.com