Overview:- Since last 7 consecutive week’s we are witnessing downfall in the pair and pair is heading south side with strong bearish momentum. The pair has arrived at 4 year’s fresh low and seems like bears are not ready to stop at these levels and further downfall is still awaited on the charts. A downtrend line is also lying on the daily as well as weekly chart which indicates that the down side pressure will continue as long as it remains intact.
Fundamental analysis:- Following its slump to the multi-year low, mainly due to the greenback’s overall strength and sluggish ANZ data, the NZD/USD pair takes the rounds to 0.6310 at the start of Friday’s Asian trading session.
Activity Outlook and Business Confidence numbers from the Australia and New Zealand Banking Group (ANZ) offered major damage to the Kiwi pair on initial Thursday. August month’s data suggested that Activity Outlook dropped from 5.0% to -0.5% while Business Confidence plummeted to -52.3 versus -44.3 earlier.
Also adding the weakness to NZD/USD was early-day pessimism surrounding the US-China trade relations, the tussle between the economies at South China Sea and China’s strong military presence at Hong Kong.
While upbeat comments from Chinese Commerce Ministry and holding back of the retaliation to the recently announced tariff hike by the US receded trade war risk and helped the US treasury yields to recover, the resultant strength of the USD continues to hold the pair near late-2015 lows.
Technical Analysis: – From technical prospective we can see that pair took the charge from 3rd week of July month when initially it formed a bearish engulfing price pattern in the form of bearish marabuzo candlestick well that was just a starting and then we have seen reaction of this pattern on the weekly chart when three black crow price pattern has been posted on the chart. Recently it has given us valid breakout of previous swing’s low of 0.6431 level which confirmed that further downfall is still awaited and the 0.6196 is next level which can be approached by bears.
The potential rounding bottom pattern is in process of formation which is suggesting us that further downside risk is still on the cards and our bias remains bearish on the pair as long as 0.6500 levels remains intact. The dots of parabolic SAR on the upside of the candles are suggesting us to keep our view as bearish whereas RSI is also favoring the bears from negative territory and even RSI arrived at oversold territory on the daily chart which indicates that some correction can’t be ruled out. MACD indicator providing zero line crossover along with MACD line and signal line crossover which is also strengthening the bears. Overall pair is trading and sustaining below the moving average lines which is generating bearish signal for the time being.
What Next:- Overall bears are playing at their front foot and leading in the game and the way bears are reacting it seems like they are not ready to stop in early stage and they are approaching the further low of previous swing’s low of 1.6190 level at least which is a low of August 2015. The 0.6405 level is immediate key resistance level followed by 0.6500 level where as 0.6200 level can be considered as key support level followed by 0.6130 level. Odds are in favor of bears and intraday to weekly bias remains bearish on the pair.
In our previous report also we mentioned to short the pair at 0.6600 level for the target of 0.6350 level and our target has been achieved so we hope that our readers must have made profit from this move.
Trade idea:- Based on chart and studies above we would suggest our traders and investors that go for short around 0.6340-50 level for the target of 0.6200 and 0.6100 with stop loss of 0.6450 level.