NZD/USD: Analysis

NZD/USD: Analysis

The Bulls on the NZDUSD destroyed resistance levels to come to a stand-still at heights not reached since July 2023, rallying toward 0.6250 on improved economic data from New Zealand.

It surged on improved economic data from New Zealand, such as Westpac Consumer Survey and Business NZ PSI which improved to 88.9 and 51.2, respectively. The dovish comments from Fed officials also contributed to the pressure which undermined the US Dollar.

From a Technical Standpoint, on the weekly chart, it seems to be paying homage to a descending channel (with more lows connecting than highs). At the moment, the bulls seem to be struggling to push past the upper limit (resistance) of that channel, which coincides with the 100-Day Moving Average.

Fig 2a: Weekly Chart of NZDUSD showing price moving in a descending channel and currently hovering around the 100- Day Moving Average (Thick Blue Line).

On the Daily chart, we see the following:

-Price currently hovering around significant resistance level: 0.6247, a level it reacted to at least 3 times in the past.

-We see Over-Bought Levels on RSI, and Negative divergence currently happening between price swing high levels and rising waves on RSI.

Fig 2b: Daily Chart of NZDUSD showing price reaction to resistance level 0.6247
Fig 2c: Daily Chart of NZDUSD showing Negative Divergence on RSI

On The 4-Hour Chart:

-Moving Average lovers will swoon at the Significant gap between the 8th EMA (Black Thin Line), and 14-SMA (Red-Thin Line).

-The Gap between the 8-EMA (Black Thin Line) and the Tweezer tops.

Fig 2d: 4-Hour Chart of NZDUSD Showing Wide Gap Between The Thin Moving Average Lines (8-EMA and 14-SMA), and Between 8-EMA and Reversal Candles.

These two patterns are in line with a bearish retracement/reversal. If not, at the least, they indicate that a correction in price action is imminent.
On the 1-Hour Chart:

  1. -Double Top Pattern.
  2. -Two wide gaps between the 8-EMA and Reversal Candles at two different peaks.
  3. -Wide Gaps between and 8-EMA and 14-SMA

These patterns also indicate that a reversal is imminent.

If breaks and closes significantly below the 50-SMA (Thick Green Line), we would most likely see a Strong Reversal in line with the strengthening of the dollar occurring across all pairs tied to the USD.

Fig 2d: 1-Hour Chart showing Double Top Peaks, and Correctional Patterns Between Moving Averages and Reversal Candles.

Correlations: The one correlation tied to the NZDUSD is the AUDUSD which have positive correlative effects on each other. Therefore, concerning everything with the NZDUSD, we should remember to check the AUDUSD
for agreement in patterns between them.

From a Fundamental Standpoint, NZD/USD continued to move on a bullish run beginning on December 11, trading higher around 0.6240 during the European session on Monday. The New Zealand Dollar (NZD) gained
ground against the US Dollar (USD) on the back of improved Kiwi economic data.

Westpac New Zealand revealed a Consumer Survey for Q4, which showed an improvement from the previous readings of 80.2 to 88.9. Business NZ Performance of Services Index (PSI) for November rose to 51.2 from the
previous 49.2 figures. On Friday, Business NZ Performance of Manufacturing Index (PMI) improved to 46.7 from 42.5 prior.

Dovish comments from Federal Reserve officials contributed to the surge in prices of US Treasury bonds, which in turn, pushed down the US yields. The lowered US yields put pressure on the US Dollar Index (DXY).

Market participants seek further impetus on economic conditions in both countries. New Zealand will release Trade Data, the NZ Business Confidence survey, and ANZ – Roy Morgan Consumer Confidence. The United
States will release also Housing data on Tuesday.

In the meantime, I’m bearish for the NZDUSD unless something changes in the charts.

The NZDUSD looks to deliver some early Christmas gifts to us this year banking on the Descending Channel (on the weekly chart), and the bearish patterns formed up on the 4-hour chart/lower time frames.

Hence, on this pair, Have A Merry Christmas in Advance. ☺☺ 

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