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Market Analysis

Technical analysis of NZDUSD

October 09, 2019
BY Michael Stark

We can clearly see the loss of momentum downward on the four-hour chart of the New Zealand (Kiwi) dollar against the US dollar (NZDUSD). The sustained period of losses appears to have come to an end for now, with more of a ranging movement taking its place. Fundamental events have been critically important for this symbol over approximately the past two months.

Low support here is the decade low of 0.62. This seems to be a very strong area from which we might observe a bounce if a retest occurs. High resistance appears to be the area of 0.645; this zone is probably not as strong as 0.62 but it could still resist testing.

Technical indicators on NZDUSD H4

The standard combination of 20 (from Bands), 50, 100 and 200 simple moving averages gives us a weak buy signal. It also contributes to the overall picture of less downward pressure. Price has moved above the 20, 50 and 100 SMAs as of this morning. Bollinger Bands (20, 0, 2) meanwhile have contracted. The presence of the upper deviation overlapping the 200-period SMA indicates that 0.633 is an important area of resistance on this chart. We can also see that price failed to move above the 200 SMA on Friday night GMT.

The slow stochastic (15, 5, 5) also suggests that selling pressure has decreased. Friday night’s clear crossover in overbought was not the beginning of a sharp reaction to the downside. Both the main and signal lines are close to neutral at the time of writing. MACD (12, 30, 9) does not yield a clear signal either: the histogram and the signal line are nearly overlapping very slightly in positive territory.

Price action and Fibonacci

The obtuse angle of the consolidation since last week might confirm the overall impression that selling pressure has dissipated. As is common under such conditions, we can notice several dojis and near-dojis around the weekly close and open, suggesting indecision. The most important signal a buyer might seek here would be the close of a period above the 200 SMA. In context, this would be a very strong buy signal. On the downside, the relatively strong reaction upward from 0.62 last week appears to confirm this area’s key importance as a support.

Fibonacci retracement here is based on the latest downward movement from the first half of September. The extension is this plus the retracement last week. The 50% retracement is probably the most important area of resistance from Fibonacci. This would be especially true if it started to overlap with the upper deviation of Bands and the 200 SMA over the coming periods.

Key data points

The most important data for NZDUSD this week are the release of the FOMC’s minutes tonight and tomorrow afternoon’s release of data on inflation. For more information on these, please consult yesterday’s fundamental analysis.

Technical analysis NZDUSD: summary

Indicators and price action on the whole suggest a degree of consolidation. It’s possible that price might retest the intersection of Bands and the 200 SMA around 0.633 this week. However, traders must be assiduous in monitoring fundamental events tonight and tomorrow afternoon.

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