Kiwi Dollar Forecast Remains Intact Despite Some Volatility

Key Points:

• Long-term forecast remains intact.

• Gains should continue next week before reversing sharply.

• 0.73 handle likely to be a near term maximum.

We return to the Kiwi Dollar to take a look at how the pair’s medium to long-term forecast is holding up given the rather torrid week that has been. Luckily, the NZD seems to be behaving itself despite running into another zone of resistance which could threaten the overall forecast.

Specifically, whilst the pair is ranging between the two trend lines and forming the Gartley pattern, it seems to have run into opposition around the 0.7247 mark. This isn’t too much of a surprise given that this has proven to be a sticking point before which has capped bullish momentum and even encouraged reversals. Moreover, it rests approximately in line with the 23.6% Fibonacci level.

Fortunately, it looks as though we are going to see the push to point ‘C’ take place anyway as a number of other technical readings are hinting that bullish momentum remains in place. Firstly, we can see that the 12 and 20 day moving averages are moving to perform a crossover which would typically indicate further bullishness is on the way.

In addition to this, the Parabolic SAR is on the verge of having an inversion which could indicate that the uptrend is going to complete in the near-term. This would seem to be supported by the MACD oscillator which should have a signal line crossover in the near-term, compounding bullish sentiment. Moreover, the presence of a double bottom will be getting the bulls riled up as we speak.

However, despite these apparent upsides, we shouldn’t get carried away as the descending trend line will be keeping things in check. Furthermore, the stochastics are moving out of oversold territory which will be severely limiting the likelihood of a breakout from the pennant structure. As a result, we still expect to see the Gartley pattern retrace which should enter its final leg within a week or two.

Ultimately, the long-term forecast we discussed last week largely hinges on point ‘C’ being reached which makes this current resistance level fairly important. However, as discussed, there doesn’t seem to be much in the way of technical opposition to the push higher and it’s going to be a fairly quiet day on the news front which should prevent any upsets. This being said, keep an eye on the news feed as weaker US results could actually see the move back to the trend line occur faster than currently forecasted.