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NZD/USD Technical Analysis: NZ Dollar to Bounce from 11-Year Low?

NZD/USD Technical ANALYSIS: BEARISH

  • New Zealand Dollar on pace for the longest losing streak in 4 months
  • Positive RSI divergence hints prices may bounce from an 11-year low
  • Sentiment studies offer mixed signals, leave door open to retracement

The New Zealand Dollar is working on the fifth consecutive day of losses against its US counterpart, a losing streak that would make for the worst performance in four months. A break below the 78.6% Fibonacci expansion at 0.5995 appears to initially expose the 100% level at 0.5872. Alternatively, a move back above 0.5995 – now recast as resistance – may set the stage for a retest of the 61.8% Fib at 0.6092.

New Zealand Dollar vs US Dollar price chart - daily

NZD/USD daily chart created using TradingView

Zooming in to the four-hour chart warns that downside follow-though may not be as readily forthcoming as the daily bar view suggests. The appearance of positive RSI divergence speaks to ebbing downside momentum and warns that a correction upward might be in the cards. Prices probably need to break falling trend line resistance set from the March 9 high to make the case for upside follow-through however.

New Zealand Dollar vs US Dollar price chart - 4 hour

NZD/USD 4-hour chart created using TradingView

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NZD/USD TRADER SENTIMENT

New Zealand Dollar vs US Dollar price, trader sentiment chart

Retail sentiment data shows 66.02% of traders are net-long, with the longtoshort ratio at 1.94 to 1. IG Client Sentiment(IGCS) is typically used as a contrarian indicator, soretail traders being net-long suggests NZD/USD may continue to fall. However, positioningis less net-long than yesterday even though it is moresocompared with last week.This makes for a clouded sentiment-based outlook.

See the full IGCS sentiment report here.

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NZD/USD TRADING RESOURCES:

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the Comments section below or @IlyaSpivak on Twitter