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. The New Zealand Dollar has plummeted more than 6% from the yearly highs against the US Dollar with price now testing lateral support around the 65-handle. These are the updated targets and invalidation levels that matter on the NZD/USD weekly price chart heading into the start of June trade. Review my latest week’s Strategy Webinar for an in-depth breakdown of this setup and more.
NZD/USD Weekly Price Chart
Notes: In my last New Zealand Dollar Weekly Price Outlook we noted that Kiwi had, “broken below both up-trend support and the multi-month range we’ve been tracking and leaves the risk weighted to the downside in NZD/USD.” One month later and price is down more than 2% with Kiwi registering fresh yearly lows last week.
The immediate focus is on the 2018 low-week close at 6507– a weekly close below this threshold is needed to keep the short-bias viable targeting the 2018 low at 6424 and more a more significant support confluence at 6343/47. Initial resistance stands at the January swing lows at 6586 with broader bearish invalidation now lowered to the yearly open at 6705.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: Failure to mark a weekly close below 6507 would leave the immediate short-bias vulnerable heading into the start of June trade. From a trading standpoint a good spot to reduce short-exposure / lower protective stops. Be on the lookout for downside exhaustion near-term. Ultimately a larger recovery should prove corrective and may offer more favorable entries.I’ll publish an updated NZD/USD Price 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-long NZD/USD – the ratio stands at +3.35 (77.0% of traders are long) – bearish reading
- Traders have remained net-long since April 2nd; price has moved 5.6% lower since then
- Long positions are 3.7% higher than yesterday and 0.4% higher from last week
- Short positions are 22.9% lower than yesterday and 4.6% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Traders are further net-long than yesterday & 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.
See how shifts in NZD/USD retail positioning are impacting trend- Learn more about sentiment!
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex