NZD/USD made a recent break from its impulse waves on the 4-hour chart, indicating technical analysis for a correction wave pattern. As you can see on the chart, the rising trend line connecting the lows of the price has recently been broken.
A break and retest setup might work for this pair if NZD/USD technical analysis shows a potential pullback to the broken support zone. Using the Fibonacci retracement tool on the latest breakdown indicates that the levels line up with the broken trend line. In particular, the 61.8% Fibonacci retracement level coincides with the trend line while the 50% level is closer to the .8600 major psychological handle.
NZD/USD Technical Analysis
For now, the RBNZ is still one of the most hawkish central banks since they decided to hike interest rates in their latest monetary policy statement. However, the Fed could also sound hawkish when the non-farm payrolls release comes in stronger than expected. This could confirm the technical analysis signals showing that NZD/USD is starting a correction wave pattern after the latest breakdown.
Take note though that stochastic is already in the oversold zone, signaling that the pair is due for a quick bounce. How long this rally might last depends on the market catalysts and so far, there is none lined for New Zealand for the rest of the trading day.
A pickup in risk appetite might also lead to gains for the Kiwi but it appears that traders are more eager to book profits off their long positions for now. A weaker than expected NFP reading might lead the rally to resume, as it would confirm that the RBNZ is much more hawkish than the Fed. After all, Yellen did admit that the US labor market is still very weak and that it could rely on continued stimulus.
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