In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. Kiwi is up more than 2.4% against the US Dollar from the yearly lows with the exchange rate reversing sharply from the yearly open range-highs this week. These are the updated targets and invalidation levels that matter on the NZD/USD weekly chart heading into the close. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
NZD/USD Weekly Price Chart
Notes: In last month’s NZD/USD Weekly Technical Outlook we noted that, “the Kiwi range continues and the longer this holds, the bigger the break. From a trading standpoint, price is now coming off the range highs and until we clear 6707-6941 – the medium-term outlook remains neutral.” Kiwi remains within the confines of this critical zone with price reversing sharply off range extremes this week on the back of the FOMC interest rate decision.
A high was registered at 6939 on Wednesday before reversing sharply to close back below the yearly high-day close at 6889. Note that weekly momentum has continued to maintain a strong posture below the 60-mark and further highlights the threat to the near-term advance. That said, key resistance remains at 6931/41 where the 50% retracement converges on the 200-week moving average and the objective yearly opening-range highs. A breach / close above is needed to validate a breakout targeting the 61.8% retracement at 7050 and the upper parallel / 2018 open at 7094.
Support rests with the 2018 trendline, currently around 6740, with key support / broader bullish invalidation steady at the yearly open at 6705. Weakness beyond this threshold risks substantial Kiwi losses with such a scenario targeting the 61.8% retracement of the late-2018 advance at 6633 and the 2018 low-week close at 6507.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: Kiwi is 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. I’ll publish an updated NZD/USD Technical Outlook once we get further clarity in near-term price action.
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NZD/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short NZD/USD – the ratio stands at -1.42 (41.3% of traders are long) – weak bullish reading
- Traders have remained net-short since March 14th; price has moved 0.6% higher since then
- Long positions are3.1% higher than yesterday and 13.2% lower from last week
- Short positions are 23.6% lower than yesterday and 3.6% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Kiwi prices may continue to rise. Yet traders are less net-short than yesterday but more net-short from last week andthe combination of current positioning and recent changes gives us a further mixed NZD/USD trading bias from a sentiment standpoint.
See how shifts in NZD/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant New Zealand / USEconomic Data Releases
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex