NZD/USD bears leaving the building towards daily structure
|- NZD/USD fell on Tuesday as the greenback picks up a bid on risk-off flows.
- NZD/USD has had a good run to the downside, bulls are now waiting on the sidelines for Wave 3 bullish extension.
NZD/USD has been trading at 0.6621 between a range of 0.6707 and 0.6612 as the greenback bounces back to life.
The US dollar rallied on Tuesday, weighing on the commodity & EM complex, and therefore the kiwi also, following a deteriorating of Sino/US relations and general pessimism surrounding G10 politics and economies.
Risk appetite remains weak into the early Asian session as Wall Street closes with US benchmarks firmly in the red. The S&P500 index is down some 2.7% five minutes before the bell.
Tough rhetoric from President Donald Trump on future relations with China if he wins a second term sparked a flurry of risk-off supporting the greenback.
Trump said “we are going to end our reliance on China” and that the US will start manufacturing its own medical supplies in order to reduce its reliance on China.
Some unwind of the recent rise in US inflation expectations has helped to drive an unwind of short USD positions.
Market expectations do not anticipate that the FOMC will announce an easing in policy next week to support the move towards average inflation targeting,
analysts at ANZ Bank had to say on the matter of the firmer US dollar, noting that a break of support in NZD/USD around 0.6610 could open the way for a move to 0.6550 near term.
Getting tough on China
The analysts at ANZ Bank explained that a tough stance is being taken by both Trump and Biden as part of their political campaigns:
- Trump has indicated he plans to impose hefty tariffs on Chinese imports if he is re-elected.
- Chinese journalists in the US have had visas cut to 90 days and Chinese authorities have imposed similar restrictions on US journalists working in China.
- Meanwhile, two Australian journalists have rapidly exited China after questioning by Chinese authorities.
NZD/USD levels
While it appears to be a bearish fundamental environment for the kiwi, it could be short-lived according to the following technical analysis:
In the prior analysis, which can be read in full here, the current spot market was forecasted as a target area for a high probability and favourable risk to reward, as follows...
Full Target
Meanwhile target
The position, if taken and not already closed out, can now be closed here or for the sake of a few extra pips, the full target to 0.66 the figure is still a possibility.
Bullish prospects
The point is, however, you do not need to cash in on 'exact targets' to be profitable in forex.
Also, the market structure is already starting to look bullish again, from a distance that is, as follows, so it's time to start thinking about that.
Daily chart
The price has been 12 pips away from the target, so time to start looking at the long playbook.
4HR chart
As can be seen, the price will need to consolidate and move back into a bullish situation above structure for the entry to be validated.
Bulls will target either a new higher high within a new impulse or otherwise known as 'Wave 3', or this could be just a correction of the daily Wave 1 to target completion of a monthly reverse H&S.
More explained, here:
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