Kiwi Dollar was pushed lower yesterday on renewed fear that Obama may be able to get his military action wish from Congress, after reports of support from Republican leaders emerged. This drove USD stronger on safe haven slows, pushing NZD/USD below 0.78 in the first few hours of US trading session, hitting a session low of 0.7776. However, price did not take this decline lying down, with prices climbing back above 0.78 towards the end of US trading session. This morning’s Asian session continued the bullish movement, sending price back to a a high of 0.782. But alas, it seems that the bullish impetus isn’t enough, with prices unable to regain back the highs of yesterday, resulting in a small pullback that we are experiencing currently.
There isn’t much fundamental news regarding NZD for the past 2 days. And where fundamentals are absent, technicals come out to play. Looking from a pure technical perspective, it seems that the small pullback that is happening now can be regarded as a rebound from not only Channel Top, but also Senkou Span A, suggesting that the attempt to breakout of the Kumo has failed. This opens up Channel Bottom and Senkou Span B as potential bearish targets, with bearish forward Kumo agreeing with the outlook. Stochastic readings are still pointing higher though, but readings have yet to clear the “resistance” of 50.0 which has been the “support” for the Stoch curve just yesterday. As such, do not be surprise to see Stoch curve peaking here, which will favor a bearish move in line with all that has been mentioned earlier.
Long term chart shows bulls failing to climb back into the rising Channel. This is a strong bearish sign but traders should continue to stay conservative as NZD/USD has been known to be highly volatile just around these levels. Hence it may be better to wait for current weekly candle to close and preferably observe the following Monday’s follow up reaction before we simply declare Channel Bottom as held. Nonetheless, stochastic readings are pointing lower and favor a move lower, but with not much space between now and the Oversold region, we could see prices finding support around the swing lows of 2011 and 2012.
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