technical analysis NZDUSD

Technical analysis of NZDUSD

The Kiwi dollar like many other currencies has declined so far today against the US dollar amid general strength by the latter. Weaker spending data from New Zealand this morning has also been a factor against NZD. This technical analysis of NZDUSD looks at the daily chart plus some indicators on the four-hour chart.

High resistance here appears to be the latest peak around 74.6c. Low support is less clear but it might occur around 66c. Conversely, various psychological areas especially 70c are likely to be in focus before this fairly distant area might be tested.

Price action

 

Recent price action has generally been more indicative of a change of the trend than a consolidation. The first factor behind this idea is that the current downward movement since the end of last month comes at an acute angle from the overall trendline since Q4 2020. Another factor is the very large down candles on 25 and 26 February.

The next test of 70c is likely to be critically important for direction in the further future. Failure to break through might lead to the establishment of a channel between around 70c and 74.5c, while a successful push below could drive more losses and bring the next few full cents into view over the medium term. Establishing whether and where to enter might be helped with indicators.

Technical indicators on NZDUSD H4


technical analysis NZDUSD

On the timeframe immediately below the dailies, there is a very clear oversold signal from Bollinger Bands (50, 0, 2), with price on track to complete its third successive close outside the lower deviation of Bands. Traditionally, many new sellers would want to wait at least until price is back inside the lower deviation, and preferably when it’s closer to the SMA in the centre of Bands. 

Moving averages and parabolic stop and reverse give sell signals, with the former having death crossed at the start of the month. Three black crows completing this morning GMT would usually be taken as a strong sell signal on this timeframe as well.

Technical analysis of NZDUSD: summary

 

Apart from testimony from the head of the FOMC at 16.00 GMT today, the key data coming up for this symbol are tonight’s balance of trade from New Zealand at 21.45 GMT. The consensus for this release covering February is around NZ$400 million against the previous negative NZ$626 million.

While the technical picture for NZDUSD is overall quite negative at the moment, selling in during oversold and against the main trend on the daily chart is generally a risky approach. There is also little certainty at the time of writing that price will break below 70c. A bounce from there or continuation downward after a breakthrough both seem to be possible this week depending on data and sentiment, so caution might be appropriate.

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