NZD/USD: bears licking their lips for test of 38.2% Fibo (0.6540) before 50% (0.6518) support
|- NZD/USD has been taken out of the ascending hourly channel to the downside and trades below the 50% Fibo retracements of the prior bear extensions between the 29th Sep highs and 7th Oct lows.
- The antipodes have been spooked by the weakness in the CNH despite the various Chinese officials jawboning their benchmark indexes higher.
- The DXY has found a footing on the 96 handle from 95.47 lows on the day.
NZD/USD is being weighed by the divergence between the US economy and rates to that of its competitors despite a disappointing time in US stocks. The dollar us flexing its muscles at the start of this week and the antipodes are suffering in a realm of heaviness n the commodity complex and EM-FX.
NZD/USD initially climbed to a high of 0.6612 and beyond the 50% 0.6562 & 61.8% 0.6594 Fibos but staged a head fake break of the descending daily channel there and was picked off by bargain hunting bears taking out stops just below bullish territory R1.
Plenty at play here
Looking around, USD/CNH is en-route for a test of 7.00, with bulls carving their names on the 6.95 handle on the way there on Monday. The DXY is also on the warpath and has broken into bullish territory on the 96 handle, playing catch up to the US 10yr real yield at the highest since 2011. The DXY's close was, in fact, the best for two months. Until stocks stabilise, the Kiwi will likely remain pressured and that recent run of CPI and GDP data is likely to be considered as transitory.
"Kiwi lost ground overnight, with the USD strengthening on the back of continued market unease. We expect USD strength has a bit further to run, but price action is likely to be choppy," analysts at ANZ Bank New Zealand argue.
NZD/USD levels
- Support 0.6460
- Resistance 0.6620
Bears can continue to take their cues from the longer-dated charts such as the monthly that is indicative of a continuation to the downside. However, the recent business done below the 50% retracement is also key in the bear's quest for lower levels. An extension of this downside below 0.6505 opens S3 located down at 0.6476 and the 23.6% Fibo (20th Sep/7th Oct range) located at 0.6489. However, a break of the descending channel's resistance line and 0.66 the figure opens the room to 0.6634 as the 76.4% Fibo target, (20th Sep/7th Oct range).
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