NZD/USD Bears Still Hunting

Colin Jessup

By: Colin Jessup

In my previous post on the Kiwi I noted that there are at key levels of support at around 0.8000, and was anticipating that the bulls were going to take the reins themselves and continue moving upwards toward the previous high at 0.8842. These levels have not changed of course, but it appears the bears aren't quite ready to hibernate and have gone on something of a feeding frenzy. In the first week of August they pushed price down to a low of 0.7964 but didn't have the strength to keep it there and closed the week at 0.8319 forming a hammer candle. One way to interpret these candles, especially one that forms off of a 50% retracement level at 0.7977, is that while the bulls might have lost that week, they weren't going to give up easily and could cause prices to trade higher the following week...but not so far.

Last week marked the third week in a row that the kiwi has fallen, which poses the question "Why and what Now?". In the past week we have seen reports indicating that the inflation rates in the land of the kiwi are expected to rise up to as high as 3% within 2 years (higher than previous projections of 2.64%), the trade surplus narrowed in spite of an expanding GDP ( indicating the NZD economy is moving forward) and better than expected retail sales numbers. Finally, food prices rose by 1.4% making those Vegemite sandwiches just a little more costly. All of this adds up to a mixed bag of economic data and apparently just enough negativity to shrink the currency against the Greenback from the west.

NZD/USD Weekly Chart August 22, 2011

So what now? Well, I have changed my sentiment from bullish to bearish on the pair...last week's price action closed below the 38.2% retracement fibo level drawn from the lows in March to the high of 0.8841 a few weeks ago. Should the bears continue hunting, we can expect to see price pull back to around 0.7977 (50% fibo) and 0.7850. We also have an ascending trend-line intersecting with that key support number, 0.7850 which may hold the bears in check with the help of the 61.8% retracement level just below it at 0.7773. Also, keep an eye on price as it falls to the 0.8115 area as that could be solid support as price has both opened and closed at that level several times this year alone.

Happy Trading!

Colin Jessup
Colin Jessup is certified in both Securities & Technical Analysis from the Canadian Securities Institute, founder of Omegatrader Canada and a Live Trading Coach at TheTradingCanuck.com, a service that calls live trades to captures dozens of pips daily with low drawdown.

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