NZD/USD Post-RBNZ Sell-Off Targets Yearly Support

Kiwi is down nearly 2% from the monthly highs against the US Dollar with last night’s Reserve Bank of New Zealand (RBNZ) interest rate decision fueling a break below monthly open support. These are the updated targets and invalidation levels that matter on the NZD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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NZD/USD Daily Price Chart

Kiwi Price Chart (NZD/USD) - New Zealand vs US Dollar Daily

Technical Outlook: In my latest NZD/USD Weekly Technical Outlook, our bottom line noted that price was, “responding to confluence resistance / the yearly opening-range highs and leaves the immediate advance vulnerable sub-6941. From trading standpoint, a good place to reduce long-exposure / raise protective stops and be on the lookout for possible price exhaustion.” Price reversed off confluence resistance early in the week at 6923/31 with a dovish RBNZ last night fueling a decline of nearly 1.6% today.

A close below the 100-day moving average / March open at 6807/10 would leave the risk lower targeting trendline support extending off the 2018 lows, currently around ~6770s. A break below this threshold exposes the 200-day moving average at ~6737 backed by the 61.8% retracement of the 2019 range at 6722.

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NZD/USD 120min Price Chart

Kiwi Price Chart (NZD/USD) - New Zealand Dollar vs US Dollar 120minute

Notes: A closer look at price action shows Kiwi breaking below weekly open / channel support today with the decline now testing the 1.618% extension of the decline at 6793. Initial resistance now 6819 backed by 6870 with bearish invalidation now lowered to the yearly high-day close at 6889.

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Bottom line: Kiwi has turned from multi-month consolidation resistance and keeps the focus on a reaction just lower near the 2018 trendline. From a trading standpoint, we’ll favor fading weakness while below 6889 – look to reduce short-exposure / possible price exhaustion on a move lower. Ultimately a break below yearly open support at 6705 would be needed to validate a larger turn in price.

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NZD/USD Trader Sentiment

NZD/USD Trader Sentiemnt - Kiwi Positioning

  • A summary of IG Client Sentiment shows traders are net-long NZD/USD – the ratio stands at +1.17 (53.9% of traders are long) – weak bearish reading
  • The percentage of traders net-long is now its highest since March 12th
  • Long positions are46.1% higher than yesterday and 40.5% higher from last week
  • Short positions are 23.7% lower than yesterday and 0.9% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Kiwi prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger NZD/USD-bearish contrarian trading bias from a sentiment standpoint.

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Relevant New Zealand / US Data Releases

NZD/USD Economic Calendar - Kiwi / US Data Releases

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– Written by Michael Boutros, Currency Strategist with DailyFX

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