NZD/USD: Stochastics oversold as price runs its course (ATR maxed) towards trend line support at 0.6790
- NZD/USD is headed towards the ascending trend line support just below the 0.68 handle in oversold territory, ripe for a correction within the rising trend and correction of 2018's downtrend.
- NZD/USD is currently trading at 0.6809, within a range of 0.5853 and 0.6796.
NZD/USD has been on the back-foot for the most part of the week, declining from a double top at 0.6902/03 despite a grind lower in the DXY over the same period.
"Month-end flow helped the greenback strengthen against the kiwi. Concerns mount with fresh geopolitical tensions and fading optimism around US-China trade also weighing on the kiwi," analysts at ANZ Bank argued.
On that note, yesterday, USTR Lighthizer stated that progress had been made on US-China trade talks though he injected a note of caution to markets stating that “much still needs to be done both before an agreement is reached”.
Additionally, the DXY has been pressured by the sudden demand for sterling which has rallied some 500 pips over the same period and makes up 11.9% os the DXY. Meanwhile, the commodity sector is a prop for the antipodeans. Base metals have been extending their gains of late, added to the strong rises seen so far this year. Copper is up 9% so far this year, zinc 11% and nickel up 22% spurred on by optimism about trade agreement, signs of China stimulus, falling inventory and rising spot premiums.
Looking ahead, the US, Q4 GDP will combine the 1st and 2nd estimate releases due to the US Government shutdown over the end of last year. "Consensus expectations are for a 2.3% annualised gain in the quarter, while the NY Fed and Atlanta Fed Nowcasts are 2.4% and 1.8% respectively," analysts at Westpac explained.
NZD/USD levels
- Support 0.6800
- Resistance 0.6910
The bird is running into oversold territory with stochastics and ATR (maxed out) pointing to a pause in the downside and a possible correction fro trend line support in the region of 0.6785/90. An upside target at the trend line resistance, slightly below the double top highs comes in at around 0.6890 - R1. A break beyond there opens R2 at 0.6929. A continuation of the downside opens R3 at 0.6755 and confluence with the 100-D SMA - (0.6761).