NZD/USD touches a low of 0.6795 on the day
The kiwi is the weakest performing major currency today as it slips against the dollar and yen as commodities remain soft in trading so far. Equities sentiment has improved over the last two hours with E-minis down by just 0.1% currently from about 0.5% earlier while European equities have posted gains after the euro dipped following poor German data.
Overall risk sentiment remains tepid though as the recovery in equities isn’t looking to be a convincing one and with commodities still weak and the yen also bid, it’s looking like a false dawn for risk to rally if anything else.
For NZD/USD, the cautious tone is seeing the pair fall back below the 0.6800 handle and now leans on the trendline support from this week’s lows. A wedge pattern is beginning to form in the pair and an imminent break will be coming along.
Although near-term bias has shifted to being more bearish, wedges can always be seen as an exception to that indication as price action acts very much like a spring being coiled up. And when it breaks, it’ll break strongly in one direction.
For a further downside move to materialise, I’d look for a break of this week’s low @ 0.6782 instead. Only then I reckon there’s room to roam back towards 0.6750 and ultimately to 0.6700-10.
Meanwhile, topside resistance levels will make it tough for buyers to catch a break either. The 100-hour MA (red line) @ 0.6822, trendline resistance sitting around 0.6835. Wednesday high @ 0.6854, Tuesday high @ 0.6870 and Friday’s high of 0.6884 are all relevant resistance levels to break above to justify a move higher.
Not to mention, the 200-day MA sits @ 0.6878 as well:
As mentioned above, if price breaks below the 0.6782 level which would be seen as a firm break below the 38.2 retracement level @ 0.6796 on the daily chart, there’s good argument from a technical perspective for it to run back towards the support region just below @ 0.6690-10 in the near-term.