Dollar sees end of the week strength; NZD underperforms

Technical Sentiment: Bearish

Key Takeaways

• US Dollar sees some end of the week buying;
• NZD underperforms as the Trade Balance report, due Sunday night, is expected to decrease by one third on Sunday;
• NZD/USD approaches Major Low and large stops around 0.8500/15.

The US Dollar continues to outperform against all majors as the trading week draws to an end and traders head out for a prolonged weekend. NZD/USD was pulled closer to 1.8515 during the European session – the most important support level dating back to March this year. The NZD Trade Balance on Sunday, with a forecast to drop from 920M to 636M, may even push the pair off the cliff into a bearish trend.

 

Technical Analysis

The Daily trend remains bullish as the main swing configuration shows Higher Highs and a strong support at 0.8500/15. This level now coincides with 38.2% Fibonacci retracement from February 4^th Low of 0.8051 to May 6^th High of 0.8778. On Tuesday NZD/USD showed signs of weakness as it dropped below the 50-Day Moving Average, failing to maintain the temporary Lows in the 0.8600-0.8615 region.

Daily Stochastic has entered oversold territory this week, suggesting the bearish cycle could once again come to an end in this area. Even so, if the pair does break through the 1.8500 support, it could still trigger an avalanche of stop losses and head towards the 100-Day Moving Average or the pivot zone/50% Fibonacci confluence area between 0.8415/30.

NZD/USD could pull off a bullish bounce from the support if the Trade Balance is higher than expected. In this case the uptrend will kick-in, aiming to test the recent 0.8600/15 support and see if it provides resistance this time around.

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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets