NZD / USD faces headwind of turbulence
- NZD / USD bears are heading for new critical weekly support.
- All eyes on the US dollar in Jackson Hole and NZD covid risks, central bank divergence.
Bears have been in the driver’s seat and devoured the bird as it falls below critical daily support.
The following is an analysis of the US dollar and New Zealand dollar arriving at a long-term bearish bias, albeit with a short-term outlook for a bullish correction in the kiwi.
According to the Reserve Bank of New Zealand’s previous analysis and subsequent price developments, the NZD continued to bleed as expected.
NZD / USD advance analysis, weekly chart
In the weekly chart above, the head and shoulders are marked, as are the key support areas.
The US dollar has also been benchmarked and the negative correlation speaks volumes when considering the bullish environment the US dollar is heading into, as the following analysis highlights:
If the kiwi is stripped of an RBNZ hawkish bias that it has enjoyed for many weeks, then the path of least resistance is on the downside. ”
Previous daily chart analysis NZD / USD
The price is stable in a critical support area.
However, a rise in the greenback through a critical confluence of resistance in the DXY, above 93.50, would likely see the edge cross the next limits below and test 0.6750. ”
DXY preliminary analysis
“The US Dollar is trying to recoup the losses in the CPI from the previous day, closing higher but still below recent highs at 93.1920.
Below, the decline is vulnerable towards the midpoint of the 92 area which reaches the 61.8% Fibonacci retracement level at 92.52. ”
Overall, the Golden Cross (50/200 day EMA bullish cross) should lead the US dollar to rise in the days and weeks to come.
However, the confluence of the 21-day EMA and July 22 lows is a compelling reversal target for bears who otherwise have to deal with some greenback strength. ”
Previous projected path for DXY
DXY Live Market Analysis
As expected, above and with a follow-up explanation here: US Dollar bid for its safe haven status and on central bank divergence, DXY broke through 93.50:
That being said, it remains to be convinced with a weekly or monthly close above 93.50:
This leaves room for some decline in the greenback leading up to the next critical event in Jackson Hole August 26-28 and the Fed’s preferred inflation measure, PCE, August 27.
In doing so, it would offer some relief to the bird and open the prospect of a significant correction for the next few days and the open.
Live market analysis of the daily NZD / USD chart
As pictured above, the price has reached the first support area as expected in the previous analysis above.
This raises the prospect of a correction to test bearish commitments from at least a 38.2% Fibonacci retracement level which has a confluence of previous lows near 0.69 the figure for the days ahead.
A subsequent failure on the rest of the suspected resistance zone should lead to a continuation of the downtrend.
It depends on the performance of the greenback at the end of the month and after the Jackson Hole.
However, given the fundamental drivers of the US dollar and its technical position on the charts, all of which are explained in the following article, the US dollar should remain in charge for the weeks to come:
When paired with the hope that part of New Zealand could emerge early from a full lockdown that appears to be pending, the NZD could face supply pressures.