We are currently observing a somehow rise in Chinese economy which by the way is encouraging investors risk appetite and with continued mixed news from the US, it is likely that Yellen and the Feds will continue with the dovish stance as it has been the case. But the case in study in this pair is the continued valuation of the NZD, when compared to other currencies- the TWI of the NZD is trading at a 4% premium which is in line with the RBNZ September 2016 forecast and threshold for this currency. We what to see the combination of the fundamentals this week to gauge what will happen to this currency seeing that the auction prices of Dairy prices is always on the rise and so is the CPI, as observed beginning of last week.
With last week’s fundamentals, let’s see how it influenced the charts:
Daily Chart Analysis
From a technical angle, the bears are simply turning on the downward gear at the moment, following a strong three day bearish run which broke through the 20 day moving average and the one month support trend line which saw prices rally from the 0.70 regions and now trending in the 0.685 area. Both momentum and OBV indicate a continued reduction in volume and thereby momentum is going to be affected as observed from the way momentum is rallying from the overbought region of the stochastics. We shall have to wait and observe if momentum is strong enough and if the current trend will continue and close below the 0.67 resistance which was broken in late January in this chart.
Fundamentally speaking, the most important news for this week will come on Wednesday and that is when the Feds will decide if it will maintain its Fund Rate at 0.05% at it has been the case. The decision whether to increase or maintain rate will be dependent on the stats which has been trickling in of late-the CPI and the employment rate. Employment data has been particularly good maintaining at the Feds target of around 5% unemployment rate though the CPI and inflation data has been growing slowing and not anywhere in the 2% ideal which will warrant a rate hike.
4HR Chart Analysis
After the strong break through below the one month clear support trend line, price is trending in the 0.685 regions at the moment. The stochastics is at the oversold region while OBV remains flat as seen in the chart but price action is forming a clear double bottom with the lows of mid last week. If price closes below this support then price might rally to the 0.67 region which is the Fibonacci 161.8 extension level. At the moment, price is somehow rising and bouncing off from the lower BB but it’s good to wait for a good shorting position if you are trading this time frame at the one hour chart.
15Min Chart Analysis
At the Asian Session, price was oscillating between the 100 and 61.8 Fibonacci levels and at the moment, price is trending sideways along the middle band of the BB. The general trend from the daily chart is bearish and so we shall only focus on shorting this pair after formation of good bear signals in the European, London and New York Session with a good risk reward ratio.
Let’s watch the US Monthly New Home sales which will be released on the New York Session at 2 PM GMT. It is projected at 521K from last month’s 512K
Verdict: Sell at all highs.