Technical Sentiment: Bearish
- ANZ’s New Zealand Business Confidence for May sees large drop to 53.5;
- NZD/USD touches 0.8515 handle;
- Price firming below 1.5000 indicates a deep correction.
ANZ’s Business Confidence drop to 53.5 exacerbated the weakness of the New Zealand Dollar, triggering NZD/USD’s sell-off to 0.8500. With the pair making fresh Lower Lows below April’s support, a deep correction is now due towards the 100 and 200-Day Moving Averages.
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Now that prices have fallen below the 0.8515 mark, the market has finally invalidated NZD/USD’s February-May uptrend. NZD/USD has been trading below the 50-Day Moving Average since last week, consequently the 100-Day Moving Average is next in line, priced at 0.8474.
So far the pair traded as low as 0.84956, which was not sufficient to trigger an avalanche of stop losses. Even so, as the bearish pressure mounts, such an event is extremely likely in the coming trading sessions.
Below the 100-Day Moving Average, price will aim for the price pivot zone at 0.8431 (resistance in January turned support in March). The 200-Day Moving Average is in the vicinity of 0.8329 – the 61.8% Fibonacci retracement between 0.8050 and 0.8778 – and represents the end of the correction for 2014’s uptrend.
Daily Stochastic is in oversold territory, yet the downtrend will continue until a suitable support level is found. From here on even larger bounces should be seen as opportunities to short NZD/USD once they exhaust and bearish price action signals confirm it.
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets