Kiwi Dollar set off on the back foot today, with price trading marginally lower during early Asian hours, continuing the downtrend that has been in play since 14th Jan which has also seen a further acceleration/extension on Friday. Bulls enjoyed a short renaissance brought by stronger than expected Chinese Q4 GDP, but bullish pressure evaporated quickly with prices currently testing the soft support of 0.8245 right now.
This highlights the strong bearishness of NZD/USD, and suggest that bearish momentum will still remain in play. However, it should be noted that it’s not all rosy parks in China, as the same GDP is actually below expectations when accounting for seasonality. Also, Industrial production and retail sales numbers are both below expectations, suggesting that Chinese economy is definitely not as strong as the headline GDP growth number may suggest. Therefore, we should not hold it against NZD/USD for not above to hold onto the gains.
From a technical perspective, bulls seems to be doing rather well. This morning’s decline managed to stay above the descending trendline, while Stochastic readings suggest that a bullish cycle is in play currently – agreeing that a bullish rebound from the trendline is possible which would open up a potential push towards 0.828. Then again traders wishing to partake in this potential move needs to realize that they would be going against short-term momentum which is bearish, and weak Chinese fundamentals that is bearish for NZD as well. Hence, even though bulls have coped well amidst strong bearish pressure, the likelihood of a strong rebound remains low.
Daily Chart is bearish as well, with today’s price action breaking the rising Channel Bottom, adding additional bearish pressure for a move towards 0.815. Stochastic readings agree, with current Stoch level close to 50.0 amidst a bearish cycle that is in play. Hence, it will take a truly courageous (read: reckless) trader to play the short-term rebound. Certainly, with RBNZ expected to raise rates soon, the likelihood of NZD becoming strongly is there, but in this case NZD will need to square off with the rising USD strength, and the end result could simply be direction-less sideways trading which is similar to what we’ve seen since September 2013. This increases the likelihood of 0.815 holding, but does little to suggest that NZD/USD will be able to rally all the way up to 0.84 from here in the short-run.
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.