NZD/USD pushed higher today, erasing all of yesterday losses caused by a weaker than expected trade balance. However, this time round there wasn’t any economic news releases that could have triggered such a “feel good” factor about the Kiwi dollar. The only bullish driver was the slightly more positive bullish sentiment which drove Asian stocks higher (Nikkei 225 +1.22%, Kospi +0.46%), but gains in New Zealand major indexes were much more modest, with NZX 50 growing by 0.02% and the NZX 10 Index gaining slightly more at 0.12%. Midcap Index shrank instead, closing 0.08% lower, suggesting that NZ stock gains are merely volatility movements and less directional. Even if it were bullish directional, it is hard to justify a close to 60 pips move in NZD/USD with this mild bullish sentiment.
Hence we are once again left with Technicals as a reasonable explanation on why NZD/USD pushed higher. There is some truth in this assertion as there were hints of Technical influences in the sell-off which drove prices back down towards 0.822. Under this light, it is understandable to see how prices managed to hit the resistance of 0.829 today as this is simply the result of Technical bulls pushing price to rebound from the 0.822 and 0.824 support levels.
If the above assertion is true, then the likelihood of 0.829 resistance holding becomes higher, as there isn’t anything fundamental that can help to assert additional bullish strength. Technical bears should be more than up to task, especially since Stochastic readings are already deeply overbought with Stoch curve actually pointing lower. A strong bearish signal will be formed if price manage to trade below 0.827 coinciding with Stoch line pushing below 80.0.
Weekly Chart is slightly bearish as current price level is an affirmation of the bearish rejection from 0.85. Stochastic agrees as readings are already within the Overbought region, opening up the possibility of a future bearish cycle (which may be now as Stoch indicators are lagging) which may lead us to 0.81 or the rising Channel Top whichever is higher.
Fundamentally, the case for a stronger NZD is there, but perhaps pairing it with a strengthening USD may not be the best idea as we may end up directionless with 2 opposing forces competing. Therefore, traders should continue to seek alternatives of other NZD pairs which may provide stronger directional movements.
This article is for general information purposes 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 any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.