Ross Woodfield
Blackwell Global Investments Limited
The Kiwi dollar (NZDUSD) has found itself in an upward trending channel at present. The volatility seen recently has spanned the width of the channel and could provide some easy gains for traders.
The latest milk price auction held overnight was closely watched by anyone with an interest in the Kiwi dollar. With almost 30% of New Zealand’s export income coming from the dairy sector it’s no surprise to see the dairy auction have a big effect on the Kiwi dollar. For just the second time since February, the dairy price auction returned a positive result and the effect on the Kiwi dollar was evident. This is could point to a levelling off in the slide of dairy prices and a possible return to growth.
The result of the dairy price auction, coupled with the weakness in the US dollar and the market volatility was the NZDUSD has hit the top of the bullish channel. We are now seeing the formation of a triple top on the shorter time frame charts which points to a reversal and a movement back down to the bottom of the channel. With the amount of volatility in all markets at present, I would not be surprised if we see some large movements coming up.
Watch for the support at 0.7969 to break first and a possible pullback to that level would confirm the breakout. From there a short is the sensible trade. Look for further support to be found at 0.7926 and 0.7891 with the bottom of the channel acting as dynamic support. A stop loss can be set rather tight for a trade such as this, just above the upper level of the channel.
There is plenty of news out for the USD overnight and it would pay to keep an eye on it. A negative result in the Unemployment Claims would reinforce the fears of slowing growth and send panic through the markets. This is the unlikely outcome as the recent trend in unemployment claims has been favourable but nothing can be ruled out in such a volatile market.
The NZDUSD pair is sitting at the top of a bullish channel after a recent positive result in the dairy auction. A triple top on the short timeframe charts point to a reversal and a bearish movement to the bottom of the channel.
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