NZDUSD SHORT: Fundamental and Technical
NZDUSD touched a 14-month high yesterday at 0.7344.
However, I believe it is overpriced, because:
Fundamentally: the RBNZ are in a easing cycle, and cut rates at their last meeting. However, RBNZ struggled to devalue the NZD with their rate cut.
Thus, I believe they will take a different approach in the coming months to devalue the NZD - perhaps in the way of a 'surprise' cut.
Technically: NZDUSD shows strong divergence on a 4H chart. It retreated quickly after touching the 14-month high above 0.734.
There is strong resistance in the 0.733-0.734 zone. This is confirmed by the last rejection from this zone in mid-July, where the Kiwi retraced back to 0.70 in the following 2 weeks.
Summary: Below 0.735, NZDUSD is set for a move back to the 0.70 handle. A break of 0.735 would expose more upside in the pair. However, any gains above 0.735, for example to 0.75, should be short-lived.
However, I believe it is overpriced, because:
Fundamentally: the RBNZ are in a easing cycle, and cut rates at their last meeting. However, RBNZ struggled to devalue the NZD with their rate cut.
Thus, I believe they will take a different approach in the coming months to devalue the NZD - perhaps in the way of a 'surprise' cut.
Technically: NZDUSD shows strong divergence on a 4H chart. It retreated quickly after touching the 14-month high above 0.734.
There is strong resistance in the 0.733-0.734 zone. This is confirmed by the last rejection from this zone in mid-July, where the Kiwi retraced back to 0.70 in the following 2 weeks.
Summary: Below 0.735, NZDUSD is set for a move back to the 0.70 handle. A break of 0.735 would expose more upside in the pair. However, any gains above 0.735, for example to 0.75, should be short-lived.
Comment:
Done
Trade closed: target reached
Technically, the Kiwi has broken a 14-month high.
However, nothing fundamentally has changed in terms of the diverging central bank policies.
I will continue to hold shorts, adding at 0.739 and 0.749.
If there is a fundamental shift in central bank policies from either RBNZ or the Fed, I would start to close my position or hedge risk by selling NZD crosses such as GBPNZD and EURNZD.