NZD/USD: perched above key descending channel resistance turned support

NZD/USD has been stabilising in recent weeks and moving into a neutral formation on the weekly charts above the prior 2018 resistance line and outside of the descending channel. It would appear that the antipodeans have bottomed and are morphing into a new bullish lease of life as markets stablise as we head into key risks for the week. 

Dollar could crumble on Democrat Houvictoryory

The US mid-term congressional elections are a key risk for the dollar. Analysts at ANZ Bank New Zealand Limited said that their base case (which we assign a 55% probability) is a Republican Senate and Democrat House. "If Democrats gain a majority, the Trump administration will likely focus more on foreign policy, with less domestic stimulus on the cards. Markets are likely to react accordingly to this softer growth outlook." 

Then, we have the RBNZ and given how well the bird has fared, we will need to hear and uber-dovish tone from the central bank to really knock the bird off from its perch and back into the descending channel. First up, we have the RBA today where the kiwi might look to take some cues from as a prelude to the RBNZ event. 

NZD/USD levels

• Support 0.6550.
• Resistance 0.6690.

NZD/USD found support at the 23.6% Fibo at 0.6635 and confluence with the 21-hr SMA that guards 0.6601 and the 38.2% Fibo.  0.6550 is where the 61.8% retracement falls. To the upside, R2 is located at 0.6716 and the 138.2% is located at 0.6775 ahead of the 161.8% that meets the June 20 low at 0.6826 ahead of the double top July-Aug highs at 0.6850/60.