Forex Trading Idea NZD/USD
Technical View
Price yesterday moved out of a sharp downtrend channel which could be the early signal that the downtrend since July 2019 could have ended. Going further back, this could also signal the decline from the high since July 2017 may be over as well. The low of 0.6200 was the Fibonacci 161.8% projection of the Mar 2019 to May 2019 decline with the corrective rally going up just above the Fibonacci 62% of the decline. MACD has given a bullish divergence warning confirming a possible low being formed. Stochastic has also given a bullish divergence warning. All these signs are pointing to a low being formed. Price could be heading higher to 0.6450-0.6480 in the next 2-3 months. If price is able to move above this level, it is likely to target the 0.6550 level.
Fundamental View
On the 8th of Oct 2019, NZ announced a budget surplus. It was also much higher than expected. NZD budget surplus came in at NZ$7.5 billion against an expectation of NZ$3.5 billion. This has given a boost to the NZ dollar. The US dollar on the other hand has seen it budget deficit increased year after year and with no sign of a reversal
The Reserve Bank of New Zealand has been cutting interest rate in 2019. To date in 2019, RBNZ has cut interest rate 3 times from 1.75% at the beginning of the year to the current rate of 1%. On the other hand, the Federal Reserve Bank has only started to cut interest rate recently and market is anticipating more rate cuts. Fed’s chairman Powell has indicated that there could be more cuts ahead. The interest rate differential could be narrowing for this pair of currency in favour of the NZ dollar.
Strategy
Buy 0.6310 with a stop below 0.6200. The first target is 0.6450-0.6480 by the end of the year. Next year by the end of the first quarter, we are looking at 0.6550.