Forex Technical Update

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The Reserve Bank of New Zealand (RBNZ)  is one of the many central banks on tap this week to meet and set interest rate policy. The NZD/USD respected a range resistance during the 12/7 Asian-European session ahead of the meeting at 3:00PM EST on 12/7. It respected the lower bound of the resistance area at 0.7820. The outer resistance is near 0.7835. On the support side, the inner or upper support is found near 0.7760, while the outer/lower bounce is near 0.87735.

The market might find some direction after the RBNZ interest rate meeting. Note that if there is no change, there is usually no press release. If there is not breakage, look for risk sentiment trigger rest of the week from Thursday's ECB meeting and Friday's EU summit, which should impact the USD as well as commodity currencies like the NZD.

Breakout scenarios: A break to the upside is bullish continuation, extension of the bull run heading into the range. A swing projection for an upside break targets 0.7990. A break to the downside, clearing 0.7730 opens up the next fibonacci retracement level of 38.2% at 0.7658, which is reinforced by resistance a established seen late November to be tested as support. Also be aware of the 200 hour SMA near 0.7690. If we get a bounce from here, see if the pullback can stay below 0.7760. If so, the market shows respect to the range as a top, and builds the case for a reversal toward 0.7658. Below this, we open up 0.76 near 50% retracement and 0.7550 near 61.8% retracement.

The 4H chart shows that to a break to the upside would also clear the 200 period SMA another confirmation of an uptrend in development. Note however that before the 0.7990 projection, there is possible resistance at the 0.7915, 61.8% retracement level. (of the 0.8741-0.7368 swing)


Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.