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NZDUSD Profit Targets Reached – What’s Next?


Jun.14.2017

NZDUSD Profit Targets Reached - What's Next? In my previous NZD/USD update, I structured a medium-term bullish trading strategy after combing the fundamental, technical and market sentiment aspects of the IDDA. By Wednesday, we reached all three of our NZDUSD profit targets that I had shared with our premium investing group members. Now that the Fed interest rate decision storm is behind us, let's take a look at this pair to see if there are any new signals for traders. (Scroll down to see the NZD/USD strategy I shared with our group members back on May 30th.)

 

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1- Technical Points

Daily Time Frame:  The NZD/USD pair hit a key resistance of  0.7319 on Wednesday on the volatility cause by Fed rate decision. However the sentiment quickly changed upon Thursday Sydney market open, as New Zealand GDP came out. While the pair remains above the Ichimoku cloud, the cloud-based bullish indication may already have expired due to the strength of 0.7319 resistance, at which the pair formed the 4th high of a series of lower highs developing since September 2016.

 

NZDUSD Profit Targets Reached - Daily Chart Technical Analysis for What's Next. NZDUSD Profit Targets Reached - Daily Chart Technical Analysis for What's Next.

 

 

Monthly Time Frame: Zooming out to the monthly time frame, we notice that the pair has actually been consolidating below the monthly Ichimoku cloud, after attempting to correct the massive downfalls which continued during the 2014 - 2015 period. The breakout of this long-term consolidation could finally indicate whether the prior correction was in fact a bullish reversal, or the pair is going continue its long-term downtrend to reach the lows of 2009 in the coming years.

NZDUSD Profit Targets Reached - Monthly Chart Technical Analysis for What's Next. NZDUSD Profit Targets Reached - Monthly Chart Technical Analysis for What's Next.

 

Fun Fact: All three of our NZDUSD profit targets reached since my last update on the pair. This, along with our USDCAD trades are only 2 examples of our many winning investment strategies. Don't miss out on our signals. Join our Investing Group now.

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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: New Zealand's gross domestic product (GDP) climbed 0.5% on quarter in the first three months of 2017, Statistics New Zealand said on Thursday. The GDP went up from a pace of 0.4% in the previous quarter but falling short of the expected 0.7%.With that their economy grew less than anticipated in the first three months of 2017 despite robust growth in agriculture. Construction activity fell for the first time since June 2015 and dairy exports shrank.

Much lower building activity combined with mixed results for the service sector took the shine off higher dairy production and saw a second quarter of moderate overall GDP growth. This can help explain the NZD drops during Thursday's Asian session.

 

Coming up: 

- Global Dairy Trade (GDT) price index on Tuesday Jun 20th.

- RBNZ rate decision on Wednesday June 21st.

 

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US Side: The Fed as expected on Wednesday raised its benchmark federal-funds rate by a quarter percentage point to between 1% and 1.25% — the third increase in a year and a half. The aim is to raise the cost of borrowing for consumers and businesses to ensure the economy doesn’t overheat and spark a bout of inflation. The Fed also  laid out a plan to shrink its massive $4.5 trillion balance sheet starting this year.

 

This decision came right after the headline retail sales slipped 0.3% in May instead of posting the projected 0.1% uptick while the core version of the report also indicated a 0.3% drop. This marks the biggest slide in consumer spending in 16 months, mostly spurred by lower gasoline prices and a reduction in sales of electronics and appliances.

 

 

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Despite the earlier data coming in red,  the Fed statement, estimates, and presser signaled that another interest rate hike may be in the cards for the remainder of the year. Fed head Janet Yellen even mentioned that additional rate hikes are possible over the next few years.

3- Market Sentiment

Market sentiment analysis is the 3rd point of the IDDA, taking a contrarian view to crowd sentiment. Retail trader data shows 25.6% of traders are net-long the NZD/USD. In fact, traders have remained net-short since May 24 when NZDUSD traded near 0.7016; price has moved 3.4% higher since then. 

In general, traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bullish contrarian trading bias. This contradicts the above technical and fundamental outlooks on the pair. 

NZDUSD Profit Targets Reached - What's Next?

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.

Medium to Long Term Outlook

 

From a technical point, we have a wait-and-see situation as we await a break out. The Fundamentals point to rather a bearish bias, while contrarian market sentiment index points to a bullish one. So literally all three key elements of the IDDA are pointing to a different direction!

I will send an alert as soon as there is a confirmation on either direction in our strategy development room of our investing group. Join today 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
0.70 0.7166 0.7319
0.71 0.7229 0.74

 

 

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