NZD/USD Technicals – Kumo Breakout Confirmed

After rallying back into the Kumo following a much stronger than expected employment data yesterday, bulls suffered a rejection and was ejected out of the Kumo, affirming the breakout scenario that happened 2 days ago. The fact that bulls failed to test 0.848 in any meaning manner underline the strong bearish pressure that continues to weigh the Kiwi down following RBNZ Gov Wheeler’s revelation that they were intervening in the the market, pushing NZD down with foreign exchange purchases.

Daily Chart

Price has since pushed beyond Wednesday’s low, and more importantly break the 0.838 significant support to open 0.828 as viable next level of bearish target. Stochastic reading is continuing to point lower even though the gradient of decline is much smoother down, suggesting that current bear cycle may find it hard to break 0.833 interim support which is around the floor of the consolidation zone back in Jan – Feb 2013.

Hourly Chart

Price is showing a continuation of bearish movement with 0.836 – the previous low post RBNZ announcement – broken. Current price level is looking to retest 0.836 which is coincided with Stochastic readings pointing higher, seemingly suggesting that a corrective bull cycle may be starting. However, even if price manage to push up higher from here, expect the consolidation post RBNZ announcement on 8th May to continue provide resistance against any long lasting rally. Should 0.836 hold, we could see extension of current bear trend and move towards 0.833.

Given that today’s Friday, be ready for any potential stronger pullbacks as short sellers may wish to close out their profitable positions for the week. Liquidity is also expected to fall greatly especially towards the final few hours of trade, which may either exaggerate current bear trend, only to see bulls buying back if bears are overextended tonight.

Fundamentally, it is understandable why over sentiment is bearish as many traders and speculators were not expecting RBNZ to turn so dovish suddenly given the latest rate decision had Gov Wheeler stating that they are unlikely to slash rates in 2013. Current price is a reflection of market taking back the hawkish assumptions they had given to NZD/USD earlier on. Add onto this the fact that USD is slated to strengthen further as long as Stocks continue to rally, the short-middle term outlook puts NZD/USD under high pressure, making the technical objective of 0.828 mentioned in Daily Chart plausible.

More Links:
USD/SGD Technicals – Pushing Towards Channel Top
AUD/USD – Holding Declines after RBA Cuts Inflation Forecast
USD/JPY Technicals – 100.0 Breached. What Next?

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