NZDUSD sees another Positive Reversal pattern…Key pivot 0.8625

Nearly two weeks ago we stated that “Kiwi continued to advance this week and overnight it ended up achieving our noted positive reversal objective at 0.8687. Accordingly, with the objective attained and little to propel NZDUSD in the near-term, we’re sidelined…That being said, for those of you who are more courageous, there are a few technical signs beginning to emerge which suggest NZDUSD may see another short-term correction back lower”. Sure enough, NZDUSD corrected nearly 200 pips from the April high before putting in a near-term bottom around 0.8550/55 yesterday.

From an Elliot Wave perspective it appears Kiwi may have formed a possible Running flat formation, as opposed to the more common expanded flat, whereby wave-b terminated beyond the top of the prior impulse wave, however wave-c ended up falling short of the bottom of wave-a. Furthermore, as long as yesterday’s low holds it implies that NZDUSD has formed another Positive Reversal, whereby daily RSI made a lower low, but price failed to confirm the low by making a higher low. As a result, these two technical indications suggest NZDUSD could be staged for a further rally over the coming days/weeks.

In the near term, we are keeping a close eye on the key pivot around 0.8625, especially ahead of tomorrow’s RBNZ interest rate announcement due out at 17:00 ET – Market expectations are for the RBNZ to raise rates by 25 bps to 3.00%. While Kiwi remains below this technical level there is still scope for a further retracement back towards the prior lows around 0.8500/20, however a break above could initially target the positive reversal objective around 0.8740/45 (which also sees the 2014 high), and potentially even the 2011 high around 0.8840 thereafter.

Chart Source: Forex Charts by eSignal