NZD/USD: bears looking for a close below the 200-D SMA

  • Kiwi supported at (200-D SMA meets double top high of 21/22nd May).
  • A stronger USD, weaker Chinese data and the ‘dovish’ signal from the ECB all conspired to send the kiwi lower.

NZD/USD has been taken down by dollar strength with better US retail sales numbers. The markets feel risk-off and the carry trade does not stack up as US rates and the greenback continue to rise, weighing on the bird and higher betas in general. Currently, NZD/USD is trading at 0.6974, a touch off the 200-4hr SMA with the price down from a high of 0.7044.

The bird has been heavy since moving sideways out of the bearish wedge, vulnerable to supply that came in yesterday after the FOMC's hawkish outcome. The pair bounced back into the sideways channel on a reverse in the greenback due to trade war angst and general volatility, although today's price action has sent the bird packing and the low exceeded yesterday's by a few pips at 0.6974.

The broader Fed-theme will likely drive any price action

The domestic calendar is light with just the Business NZ PMI that will be released by the Business NZ presenting business conditions in New Zealand.  Instead, the broader Fed-theme will likely drive any price action and that is negative for the Kiwi. 

"A stronger USD, weaker Chinese data and the ‘dovish’ signal from the ECB all conspired to send the kiwi lower after grinding higher after yesterday’s FOMC decision," explained analysts at ANZ, adding,  "it hasn’t broken out of its recent range just yet, as support just below 0.69 has kicked in again. However, if the euro continues to suffer, then we could get pulled down with it."

NZD/USD levels

First support is located right round about spot currently, (200-D SMA meets double top high of 21/22nd May). However, deeper support is located at 0.6880 while resistance is located at 0.7060. With the break of the  200-month moving average support at 0.6994 and while the weekly technicals turn bearish, bears are in control now. On the downside, a break below 0.6970 opens risk to 0.6850/80. 0.6780 comes as next downside target meeting the lows of mid-Nov 2017.  On the upside, albeit not favoured, 10-W SMA at 0.7053/60 guards space en route to 0.7440 as the January tops on the wide.

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