For the past couple of days this pair has been ranging on lower time frame and on Friday close, it moved a mere 50 pips, which is considerably lower than the usual 70-80 pip average on trending days. As things stand, we shall take a neutral approach on this pair and wait for a favorable time with clear signals to initiate a buy or sell. This is so because considering the level it is trending at, we expect either a reversal or a breakout, but looking at the US data, we see that the economy is at a slowdown and will lose ground in the short to medium term. The NZD in the other hand is buoyed by the good Asia news and since it is a high yielding currency it should benefit. We also saw that there is an improvement in the Dairy Auction price as witnessed last week.
With these fundamentals, let’s look at the charts:
Daily Chart Analysis
Price action bounced strongly from the 20 moving average and closed above this consistent support. We can see that the OBV is also adding in volume meaning that more investors are buying this currency creating demand. Since volume preceeds price, we shall see a bullish NZD so long as there is no formation of a strong bear candle in the resistance regions and price close well above the o.69 level and above the resistance with the stochastics in the lower time frames rallying from the oversold regions.
This week, it is all about checking the CPI for Asian economies-as they affect the NZD and most importantly from the US. To start off, other than the scheduled FOMC statements, the Fed with release another statement in the course of the day at a tentative time and we shall be on standby to check if they are in line with what Yellen had to say last week. Wednesday and Thursday are important days as both retail sales and CPI data for last month will be released, if inflation remains in the negative as last month at -0.2% then there will be a massive sell off of the USD. Be keen and check the Core CPI which is forecasted to reduce to 0.2% from last month 0.3% as well as the unemployment claims which is forecasted to increase to 270K from 267K.
4HR Chart Analysis
As observed the lower trend line has been a good support for the past 4 weeks or so with price failing to breach it more than 30 pips. Price action is bouncing off the line and volume-from OBV is almost flat though momentum is moving in from the oversold regions. The 20 day moving average is also almost flat and we shall have to wait for favorable signal combination to initiate either a buy or sell.
15 Min Chart Analysis
From the chart, there is a formation of a strong sell signal as both the OBV and stochastics are retracing from the overbought positions and moving away from the upper Bollinger Band. Though it is indicating a sell position, the mixed signals in the higher time frames gives us a better reason to remain neutral till there is a convincing signal to go either long or short.