Good day, dear traders!
I haven't analyzed a fairly interesting currency pair NZD/USD for quite a long time, and today I decided to fill this gap. Moreover, the reason for this is the most appropriate.
So, at its meeting today, the Reserve Bank of New Zealand (RBNZ) decided not to make changes to its monetary policy and keep the key interest rate at 0.25%. This decision coincided with the expectations of market participants, so there was no particular excitement in the auction for the "kiwi". In this situation, the main attention of investors turned to the RBNZ press conference, which took place an hour later.
I think it is easy to assume that the main focus of the press conference was the COVID-19 pandemic and measures to support the country's economy at this difficult time for everyone.
RBNZ Governor Adrian Orr said global uncertainties caused by the coronavirus pandemic and, as a result, the decline in economic activity in the country. In order not to dwell on the already clear comments for a long time and quickly move to the technical analysis of the NZD/USD pair, I will indicate the main thing. Following the results of today's meeting, the RBNZ decided to increase the incentive program to 100 billion in its national currency. I would like to note that the QE program previously amounted to 60 billion New Zealand dollars. The bank also believes that rates will remain at the current low values until the economic recovery from the effects of COVID-19 is completed, and inflation does not approach the target level. At least the RBNZ believes it is appropriate to keep the current main rate at 0.25% until at least the end of the first quarter of next year. This decision was not very pleasant to market participants and was met with sales of the New Zealand currency.
Weekly
From a technical point of view, the downward dynamics of the pair is quite obvious and has every reason to be implemented after the appearance at the end of the growth of the reversal model of candle analysis "Tombstone", which was formed the week before last and circled. This is a strong enough reversal signal that the market simply could not close its eyes.
And indeed, at the trading of the last five days, the testing of this reversal candle began, as a result of which the pair declined and ended the trading session at 0.6593. If then the upper border of the weekly cloud of the Ichimoku indicator kept the quote from further falling, then during the current trading the price has already entered the cloud and is testing the red Tenkan line for a breakdown. Closing the current weekly session below Tenkan, and even more so under the Ichimoku cloud, will undoubtedly strengthen the bearish sentiment for the "kiwi". The bullish scenario will be reanimated only if the growth of the "Tombstone" candle absorbs and the strong resistance of sellers breaks through at 0.6752. So far, this development seems unlikely, so the main trading recommendation for the "New Zealander" is sales.
Daily
On the daily chart, we see that a strong downward movement began on August 7, when the pair sank significantly. In the following trading days, the pressure was not so strong, but the NZD/USD is gradually getting closer to the strong and important psychological and technical level of 0.6500.
I do not think it is advisable to sell near this mark, this is not the best trading idea, since a rebound and (or) some correction of the exchange rate may occur from 0.6500. However, a rebound can also be triggered by the 50 simple moving average, which is currently being tested for a breakout.
In my opinion, it is much more productive to look for options to open short positions after short-term rises of the pair to the price levels of 0.6565, 0.6585 and 0.6600.
Good luck with trading!
