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NZD/USD: Buyers face stiff test of key resistance levels

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NZD/USD continues to struggle to get above 0.6800


Buyers are still in the driver’s seat but after climbing nearly 300 pips in two weeks, we may be starting to see some exhaustion. More so now that the dollar is able to put aside the midterm elections risk out of the way.
Earlier in the week, the pair broke above the 100-day MA (red line) for the first time since April. That was a key win for buyers to extend the upside move but this is where the real trouble begins.
There is no doubt that there has been plenty of positives for the kiwi as of late. Better economic data (strong labour market report), RBNZ moving forward rate hike forecast, stretched short positions continuing to be squeezed. It makes for a good cocktail for the kiwi to push higher.
But in markets, nothing ever moves in a straight line. And with key resistance levels lying nearby here, this is a good spot for traders to reevaluate the recent upside in the kiwi.
We’re sitting near the 0.6800 handle where offers lie but there’s also daily resistance from the 38.2 retracement level @ 0.6796 as well as swing region resistance around 0.6820 from the October 2017 low. Add to the fact that there are large expiries rolling off later today at 0.6800, it’s helping to limit gains seen so far in the pair.
Although things have been looking better for the kiwi recently, I’m still not all too optimistic about the outlook; for now at least. It’s going to take a whole lot more – especially economic growth data – to convince me that the turnaround here is nothing more than a correction.
But that’s not to say that the kiwi isn’t on the right track. Until the RBNZ decides to sway from its “next rate move could either be up or down” stance, it’s tough to argue a case for the kiwi to sustain a prolonged rally against the dollar as monetary policy divergence will eventually weigh.
I believe there will be more opportunities looking for shorts as we move closer to 0.6900 and unless price somehow breaks above the 200-day MA (blue line), I’m more convinced the medium-term outlook is still for a move lower in the pair.

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