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Short

NZDUSD SHORT: Fundamental and Technical

FX:NZDUSD   New Zealand Dollar/U.S. Dollar
3 months ago
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.
3 months ago
Comment: NZDUSD just broke 0.735. A conservative trader might close their position at 0.737.

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.
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