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NZDUSD Forecast Medium Term – RBNZ on FSR


May.30.2017

I just shared trading strategies and a NZDUSD forecast medium term with our Investing Group members. Following my previous piece on the pair, I thought I'd conduct an IDDA for the rest of y'all especially since the RBNZ just announced it sees diminishing financial risks on New Zealand economy as dairy prices recover.

 

 

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1- Technical Points - NZDUSD Forecast Medium Term

Daily Time Frame:  We identified a triple bottom NZDUSD chart pattern last week, with the bottoms falling approximately on the 50% Fibonacci level. Since then, the Kijun line and the Tenkan line had crossover, which is the first  Ichimoku Kinko Hyo confirmation signal. On Tuesday, we saw a massive bullish engulfing formation. And just today first thing during the Sydney session, the NZDUSD price opened above the daily cloud. Based on our Ichimoku Secrets strategy, we now have sufficient amount of signals to start looking deeper in the IDDA in order to develop a trading strategy.

 

NZDUSD Forecast Medium Term NZDUSD Forecast Medium Term

 

However the pair still have the 50% Fibonacci retracement level of 0.71 to break through. this means, we could see a pullback first.

 

Fun Fact: I shared the NZD/USD trading strategy with the Investing Group members just a bit before I started writing this piece, and we already reached our first target!

 

Monthly Time Frame: The pair remains below the monthly Ichimoku cloud, and appears to be testing the neckline of a long-term Double Top chart pattern. Heck, we are conducting the NZDUSD forecast medium term as opposed to long-term.

 

NZDUSD Forecast Medium Term - Monthly Chart Technical Analysis NZDUSD Forecast Medium Term - Monthly Chart Technical Analysis

 

If this Double Top is confirmed, that would make the most recent up-moves from September 2015 to September 2016 a mere correction of the longer and stronger downtrend which started in July 2014. On the other hand, a bullish engulfing candlestick pattern is also visible on the monthly chart. Long-term confusion baby.

 

2- Fundamental Points

The second point of the IDDA suggests looking at the economic and political developments that could impact the currency pair.

 

New Zealand Side: The Reserve Bank of New Zealand, RBNZ, said risks to the nation's financial system have receded after house-price inflation slowed and global dairy prices recovered. You might ask, what on earth could milk and cheese have to do with forex trading. You see, New Zealand relies heavily on dairy products when it comes to trade. So the Global Dairy Trade, or the GDT, is an index to watch out for when it comes to trading the NZD crosses.

In the bank's semi-annual Financial Stability Report on Wednesday, governor Wheeler said New Zealand's financial system "remains sound and the risks facing the system have reduced in the past six months." That is great news for Kiwi. However the NZD price fell immediately after the announcement. Damn those "Buy the news, sell the rumor" traders.

 

 

 

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Still, Wheeler warned that global uncertainty remains elevated and that New Zealand would be vulnerable if a sharp reversal in risk sentiment drove up borrowing costs for banks. Heck, we are conducting the NZDUSD forecast medium term as opposed to long-term. Again. :)

New Zealand home-owners have built up record amounts of debt in recent years as house prices soared, which may leave many stretched if borrowing costs were to rise quickly. Wheeler has cut his benchmark interest rate to a record low of 1.75 per cent to regenerate weak general inflation. This has required him to introduce lending restrictions in an attempt to keep housing demand on check.

 

 

US Side: Numbers out of the U.S. were mixed on Tuesday. However, the data generally kept June interest rate hike expectations in play. The CME FedWatch tool indicated an increase in tightening odds from 84.2% to 88.8% next month as they saw the latest data dump.

 

On the other hand, FOMC member Brainard warned that slowing inflation could prompt policymakers to rethink future hikes.

But she also mentioned that U.S. GDP growth is likely to rebound this quarter and that data has been consistent with this expectation. She cited that the global outlook has improved and that a rate hike is appropriate fairly soon.

 

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As for remaining risks, Brainard noted that the lack of progress in core inflation is still a concern and that the Fed might want to delay further tightening moves if more downside price pressures are seen.

Coming up: Change in Non-farm Payrolls (MAY) will be released on Friday June 2 at 12:30 PM GMT.

 

3- Market Sentiment

Market sentiment analysis is the 3rd point of the IDDA. We typically take a contrarian view to crowd sentiment. Retail trader data shows 40.7% of traders are net-long NZDUSD.  The number of traders net-long is 1.8% higher than yesterday and 22.9% lower from last week, while the number of traders net-short is 20.1% higher than yesterday and 50.5% higher from last week.

The fact traders are net-short suggests NZDUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger bullish NZDUSD forecast medium term.

 

Trading Strategy NZDUSD Forecast Medium Term

As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. We normally do not recommend trading without three or more confirmations of a specific direction from technical, fundamental and market sentiment points of view. Join us in our strategy development room by becoming a member of our investing group to learn more.

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Disclaimer: Forex is one of the HIGHEST risk investing instruments there is. If you don't have sufficient risk tolerance to trade forex, you can try investing other online securities.

 

Combining all points of the IDDA, here are Invest Diva's calculations for important approximate levels to keep an eye on.

Support Levels Turning Point Resistance Levels
0.6872 0.7030 0.7166
0.6953 0.71 0.7231

 

 

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