NZD/USD has been falling non-stop since July and 2014’s high at 0.8835. The weekly chart shows us that there has not been any meaningful consolidation in this decline. This week, price is falling below the 200-week simple moving average (SMA), and price just cracked the previous low-on-the-year (LOY) at 0.8051. (The current low this week is 0.8045). Furthermore, a trendline from the 2010 low of 0.6560 is broken.
Support and Oversold Condition:
While this week’s break of the noted support factors is a bearish signal, we might want to anticipate some consolidation around the 0.80 area especially with the weekly RSI dipping into oversold territory. Note a rising trendline, from 2011’s low of about 0.71, reinforcing this 0.80 area.
The daily chart shows the falling trend with persistently lower highs and lower lows. The daily RSI has tagged 30 many times, but as soon as the oversold condition was resolved, the market continued the downtrend. At this point, any short-squeeze should have a limited bullish outlook toward 0.8150-0.8170. A break above 0.82 and above the falling trendline could finally introduce a meaningful consolidation or bullish correction scenario. For now, NZD/USD is poised to continue falling at least toward 0.78.
Below 0.78, the next support would be the 2013-low at 0.7683 as we saw in the weekly chart.
(click to enlarge)
When we talk about NZD/USD trends, we should also monitor dairy prices as the Kiwi and dairy is positive correlated. This is because exports of dairy products is a key part of the NZ economy, and for the most part, the currency is correlated to the country’s economic well-being.
When we look at the dairy price index from globaldairytrade.info, we can see that dairy product prices have been declining sharply. Until we see a bottom and a rebound, we will probably see NZD pressured.
In the past 2 weeks, we did see the dairy price index flatten after falling almost non-stop since mid-February. Let’s see if we will see a rebound by October to help NZD/USD find some reprieve.
(click to enlarge; source: globaldairytrade.info)
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