Weekly Forecast NZD Analysis and Outlook
In terms of the NZD, it’s been a big bull move to the upside, the NZD has been strong in the last month gaining 3.5%, last month against the USD and other majors and is the best performing major currency over the last three months. In the short term its overbought and while the big trend is up there is an opportunity for swing traders to look for a correction.
In this article, we will look at the background to the NZD strength, why a trend reversal could occur, and the key technical levels in 4 pairs NZD/USD, NZD/JPY, EUR/NZD, and NZD/CAD. In terms of the NZD it’s showing some weakness on the EUR and CAD but will the USD and JPY firm up? – our view of the fundamentals and sentiment below and also the key technical levels to watch.
NZD Bullish Fundamentals That Have Driven the Rally
The RBNZ at its meeting on November 11th and kept policy on hold which was widely expected by the market and also as expected, the RBNZ also added funding for lending program (FLP), to begin in December. They didn’t rule out negative rates but were optimistic they would not be necessary.
Also, The RBNZ revised its economic forecasts for 2021 to be more bullish but kept the usual warnings of uncertainty and challenges ahead. The market pricing out negative rates helped firm the Kiwi last month and its gained additional support from general risk-on in the markets, strong stock markets and investors taking an optimistic view of growth in the global economy going forward. Finally, COVID 19 has had little impact on New Zealand’s domestic economy.
Bullish Sentiment at an Extreme Correction Before Higher Prices?
What more good news is coming for the NZD? We think the bullish fundamentals are getting priced in speculators have built up sizeable long NZD positions. In terms of the NZD being generally overbought we have seen it start to show weakness on other currencies that have benefited from the risk on environment IE the EUR and CAD. In terms of the safe haven USD and JPY (both of which are safe havens) we don’t have confirmation of a turn yet but despite risk on, the NZD is failing so far to break key resistance levels which could warn of exhaustion of the uptrend and breaks of support could confirm a significant correction to the downside.
While we could see the NZD strengthen next year, we think we could see some weakness in the short term. which is an opportunity for swing traders to trade short the NZD – Key technical levels of support and resistance below:
Technical Analysis
NZD/CAD DAILY CHART: After moving above the 0.9100 level price action stalled volatility dropped and we fell hard on Friday to the 0.9000 level. The NZD now looks a sell back to nearby resistance and if we take out yesterday’s low and fall below the 0.9000 level we would expect follow-through selling to 0.8800 and a possible move down to retrace the whole of the recent rally.
EUR/NZD DAILY CHART: After bottoming out into the 1.7000 level we have are now stalling just below the 1.7200 level. Major support is now at the 1.7100 level and 20-Day MA with first level support at today’s low. An upside breakout above resistance and today’s high could lead to a rally up to the 1.7600 as the EUR corrects its oversold condition.
NZD/USD DAILY CHART: The NZD has made a big move up from the 0.6600 level but in the last week we are trading sideways in low volatility with resistance at 0.7100 and support at 0.7000. The sideways action could warn of exhaustion and if we break support at 0.7000 we would expect a move down on higher volatility to 0.6800 and then a possible run on to 0.6600.
NZD/JPY DAILY CHART: At present we have resistance at 74.00 and support at 73.00. Volatility has dropped in the last 3 days and we have fallen back from resistance to trade just above support. If we were to break below support and the 20-Day MA we would expect a sell-off on higher volatility down to the 70.00 level to correct the NZD’s bullish extreme.
Research provided by Learn Currency Trading Online
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and should not be construed as investment advice or recommendation.
– Key to Markets will not be liable for any loss or damage arising from any such decision.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Before making any investment decisions you should understand how leveraged products work as they are speculative in nature and may result profit and losses. Please, before starting to trade, you should make sure that you understand all the risks (insert in risk a link to go to risk warning or terms and conditions).
