NZD/USD bulls taking charge from demand area for a 38.2% Fib retracement

  • NZD/USD has started to make a slight come back as risk appetite improves.
  • The US dollar may have run too far too soon, offering bullish prospects for the bird. 

NZD/USD is recovering from a one-month low in the start of a movement which had been forecasted on Wednesday here.

The bird has been under pressure this week, until the start of today's North American session.

USD strength returned and the Reserve Bank of New Zealand’s policy bias has also weighed significantly. 

The RBNZ has re-affirmed its commitment to leave the OCR on hold till at least March, although is not pretending that there are no other policy tools left of the table, signalling a readiness to act if required. 

The RBNZ reminded markets that a lower OCR and bank funding for the lending programme (FLP) are preferred options for further stimulus, noting that the FLP would be ready “before the end of this year.” 

Meanwhile, we are seeing a bit of a comeback in risk appetite on Wall Street on Thursday which has likely helped the correction in the dollar bloc.

The S&P 500 is up some 0.5% at the time of writing, but off its highs by the same margin. 

However, the commodity complex is firmly bid with the CRB index, oil and copper all behaving bullishly. 

The DXY is on the backfoot, breaking a key old hourly resistance turned new support and resistance again on a restest; See below for this analysis.

A fall in the US dollar will give some upside opportunity in the bird as explained in the following flow of charts, again, founded on yesterday's analysis

NZD/USD techncial analysis

As per yesterday's analysis, the price of the bird is turning higher in the demand area:

Yesterday's analysis

Price rejected from demand area

The price has been unable to break below the support structure and the focus is now on the upside towards a confluence of the resistance and a 38.2% Fibonacci retracement level. 

From here, the US dollar needs to give back some ground to the presumed area of support forecasted yesterday as follows:

So far, so good

DXY 1D chart

DXY H1 chart

The US dollar has broken below support and is failing the retest of the structure that now acts as resistance, confirming the downside bias which is good for the NZD/USD bullish outlook.

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