NZD/USD Forex Technical Analysis for June 22, 2016
Forex Technical Analysis – The NZD/USD pair initially broke higher during the course of the session on Tuesday, but gave back quite a bit of the rallies during the day in order to form a less than spectacular breakout. With this, I’m going to wait until we break above the top of the range for the day in order to start buying, or some type of support action below, as I believe that there is quite a bit of support starting at the 0.7050 level. I have no interest in selling, as I think that there isn’t enough room to fall before the buyers get involved.
In Other View Point – Expect big rally in NZD/USD, if UK votes to remain in the EU – Westpac
Research Team at Westpac, suggests that the UK vote will dominate all other risk events this week and NZ’s calendar will be trivial in comparison.
“Our base case is the UK votes to remain in the EU, which would trigger a large rally in NZD/USD. We target between 0.7200 and 0.7400 during the next few weeks given such a scenario. Conversely, a leave vote will cause a large selloff to probably below 0.6800. Suffice to say, a volatile week is in store.
Technical: Price action has been more constructive across time frames, however resistance around 0.7150/90 could be difficult to break above.”
In Other View – KIWI DOLLAR REACHING FOR IMPORTANT RESISTANCE LEVEL
The Kiwi dollar is reaching fresh 12-month highs this week, and spot prices may hit the $0.72 level within the next couple of trading sessions. In my chart, I’ve highlighted a channel with a slight upwards angle (compared to the sharp downtrend prior to June 2015) as well as the 38.2% Fib level (2014 highs to 2015 lows). This Fib level actually corresponds with an old support that was established between February and March 2015. After breaking at the end of May 2015, it acted as resistance, and prices plummeted even further after the textbook-like pullback in June. This level should be watched closely this week. I wouldn’t recommend any trades before the British referendum results, which may or may not have a strong impact on the New Zealand dollar (likely impact would be from global risk sentiment and would affect all risk assets). If at the end of the week, you may wish to look at short strategies around the $0.72 handle as the risk/reward ratio would be decent enough (theoretically a swing strategy with at least $0.70 as a short-term target). I would target $0.68 if a clear bearish reversal were to take place. Finally, if prices shoot past $0.725 without any bearish indications in price action, I would forget this setup altogether even if prices were to subsequently start falling back below $0.72. I’m looking for a clean bearish reversal here.