The New Zealand weakened against all of its major trading partners after the Reserve Bank of New Zealand (RBNZ) released a lower inflation outlook. Inflation expectations dropped to 1.8% from 2.06%. The weaker consumption growth along with stronger expectations that the Fed will begin tightening this summer could keep NZDUSD remaining heavy over the next few weeks.
Today, everyone will await Fed Chairwoman Janet Yellen’s testimony about monetary policy. If she remains upbeat about the economy, the US currency could appreciate to fresh 2015 highs.
Price action on the NZDUSD daily chart shows that the February bullish trend could be in jeopardy. The key trendline break that is occurring could accelerate and see fresh 2015 lows below the .7200 handle. In the event we seea bullish bounce here, key resistance will come from the 50-day SMA which is currently trading around the .7589 level. A daily close above that noted level could see bullishness eventually stall around the .7712 region.
If we do see major bearish momentum, major support will come from both the psychological .70 handle and the 161.8% Fibonacci expansion level of the February rally. It is around that key low that a bullish ABCD pattern could form.
The trade: Sell NZD/USD at .7467 with a stop loss at .7567 and a take profit at .7067. The Risk/Reward Ratio is around 1: 4
Edward J. Moya
WorldWideMarkets Online Trading