The NZD/USD Bears Have All the Reasons to Be Afraid

By Adam | Wednesday, December 7th, 2016

NZDUSD bearsThe NZD/USD has been on a remarkable decline since the US presidential election results were announced. That was mostly because of the strengthening dollar as the Kiwi still showed strong fundamentals in the last quarter of 2016.

The decline however slowed down with time and a low was reached towards the end of November, immediately setting the stage for a new recovery.

At the moment, there is very little news expected this week surrounding the Kiwi while the USA will be abuzz with FOMC rate decisions and a confidence poll slated for Friday (University of Michigan Confidence survey).

NZD/USD Technical levels

Since making the 23 November low of 0.6966, the NZD/USD recovery halted at 0.7168, just less than 30 pips away from the current level 0.7140. The moving averages have however aligned to point towards bullish resurgence since then. The price action has made two attempts at the 200MA on the one hour chart but both times, there have not been any lower lows reported.

The price currently hovers at the 200MA on the H1 chart with the larger time frames also supporting a recovery continuation.

The 55MA is currently pointing towards a bullish direction as the trend indicators also show a weakening bearish push. With a bullish candle formed so far this week, this could as well be taken that the November drop was corrective and that the longer term bullish trend is likely to continue.

The current price of 0.7140 is already above the 38.2% Fib retracement of the November drop. A daily close above this level will add more impetus to the bulls, if a purely technical approach is adopted.

Chart: NZDUSD H1 chart showing bullish trend continuation. Chart includes a custom indicator
NZDUSD chart

Trade suggestions – Eyeing for the long positions

The trend indicators at the moment have reliable signs that the current bullish action is catching steam. The 200MA and 55MA positions on the H1 chart points to a strong buying sentiment while the Daily and Weekly candles are also green. This will provide enough opportunities to traders who want to place longs around the current range above 0.7100.

Placing shorts is not recommended today because the price is too close to a resistance that has most odds against it. The longer time frames have the patterns well supported above a rising 55MA and 200MA. Most of all, a sustained break above the 0.7170 resistance this week will only expose the next crucial level of 0.7266, the level where the first recovery of October reached.

Published in News & Analysis

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