NZD/USD Technicals – Looking heavy despite hawkish RBNZ

Following a hawkish RBNZ last week, price rallied higher but is unable to push above previous swing high of Dec 16. An evening star candlestick pattern was subsequently formed with the body of the shooting star fully under 0.8465. A subsequent re-test of the same resistance failed yesterday, bringing us to where we are currently.

It is important to note that the shooting star candle was the same day which US stocks suffered the heaviest losses since 2013. The move is presumed to be backed by bulls profit taking rather than a shift in sentiment, yet unlike US stocks which subsequently recovered, NZD/USD failed to do the same. Perhaps the hawkish RBNZ momentum has ran its last? Or perhaps are traders more skeptical about Governor Wheeler’s upbeat claims? Whatever the reason may be, there seems to be inherent weakness in NZD currently, similar to AUD which is facing a rut on its own.

Daily Chart

0.84 may provide some support, but any break will open up 0.83 with 0.835 as interim support (where most of the candle closing prices lie). Stochastic is also showing a newly formed top which coincide with the timing of the Evening Star, enhancing probability of a bearish reversal.

Hourly Chart

Shorter-term chart shows support above 0.840. Though 0.841 is where the wick lies, 0.842 appears to be a better support and a holding of this level may help price move higher to 0.846. Stochastic is also agreeing with a temporarily bottom with reading exiting Oversold region in conjunction with a Stoch/Signal line cross.

With short-term and long-term charts showing different directional bias, traders may wish to look at other NZD pairs for better entry opportunities should they wish to long NZD due to the hawkish RBNZ outlook. AUD/NZD naturally springs to mind as it is a pairing between Dovish RBA vs Hawkish RBNZ, with rates differential between both currencies looking highly likely to decrease should both Central Banks walk their talk.

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