Price tested 0.838 for the first time since 16th Apr after 0.84 was broken, however 0.838 remain firm and pushed prices up higher towards 0.84 shortly after. The failure to retake 0.84 again underlines the overall bearish sentiment surround NZD/USD, which has been in play since 17th April bearish continuation which was also boosted earlier Asian trade due to weaker Chinese Manufacturing PMI.
Hourly Chart
Looking at Stochastic curve, it seems that reading is forming a trough above the 20.0 level. If the trough holds, a bull cycle will be possible which suggest that price may have a stronger retest of 0.84 soon. However that interpretation may have to take a back seat as the trough formed on 20th April shows a divergence between price levels and Stoch readings. The fact that stoch readings are higher despite lower price implies that some caution should be taken with regards to the reliability of current bullish signal. Nonetheless, if 0.838 holds and 0.84 is broken, current bearish pressure will be lifted, and allow for a retest of 0.85. However even then price may need to clear 0.85 before bullish bias can be established.
Daily Chart
From the daily chart perspective, 0.838 is just but a small interference against the larger bearish breakout backdrop. A stronger support can be found along 0.828, with interim support around 0.835. Stoch readings are still firmly pointing lower, maintaining the distance between Stoch and Signal lines. Stoch readings are still a slight distance away from the Dec ’12 lows and that may be the space needed for current bear cycle to break 0.838 and stop at 0.835 support. This is not saying that a bullish reversal will occur at 0.828, just that bearish momentum may stall slightly.
With tomorrow’s RBNZ rate decision looming, it is highly likely that speculative actions may pause, hence making 0.835 holding all the more likely before the news announcement. However, once the news is announced, price could quickly accelerate lower towards 0.818 or move up higher to 0.848 once more depending on the result. New Zealand Minister for Primary Industries said today that the drought is expected to last till September despite easing significantly. Does this mean New Zealand’s economy will head lower forcing RBNZ to ease? Or will the threat of housing prices spiraling out of control push RBNZ to sacrifice short-term growth for longer-term price stability? We’ll certainly find out more tomorrow and this may help to determine price direction for the near term .
More Links:
EUR/USD – Waiting for Direction Around 1.3050
AUD/USD – Continues to Drift Lower Below 1.03
GBP/USD – Rallies Back Towards 1.53
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