2016-08-23 12:44:45

Overview and dynamics
Despite the interest rate cut in New Zealand in early August, NZD/USD pair is growing for third consecutive week, while remaining in the ascending channel on the weekly chart.

NZD/USD pair broke through the key resistance levels 0.7240 (Fibonacci level 38.2% of upward correction to the global downward wave of the pair from the level 0.8800, which began in July 2014), 0.7290 (EMA144 on the weekly chart) and the pair is aiming at the resistance level 0.7380 (EMA200 and the upper limit of the upward channel on the weekly chart).

Apparently, this level will be reached in the short term, but further dynamics of NZD/USD pair will depend directly on the actions of the monetary authorities of New Zealand and the United States.

As pointed out by the RBNZ in the end of July in its report, the high exchange rate of the New Zealand currency is a negative factor for the development of the national economy.

The Fed's inaction will encourage the RBNZ to further mitigate the interest rate in New Zealand.

It's onle a matter of the pace and aggressiveness of the RBNZ's actions. So far, the RBNZ does not seem to intend to intensify its policy in this direction. Market participants also expect to see the key interest rate in New Zealand at 1.5% by August 2017. However, such action may be already priced in and the growth of the New Zealand dollar and NZD/USD pair may continue.

Our opinion
As we wrote in the previous review for August 10, "a rate cut by 0.25% is already priced in the New Zealand currency quotes. There is a high probability of re-break of the resistance levels 0.7240, 0.7290. In this case, NZD/USD pair is heading towards the resistance levels 0.7380 (EMA200 on the weekly chart), 0.7550 (Fibonacci level 50.0%)".

The forecast seems to be starting to fulfill, and NZD/USD pair has the potential to grow to the resistance levels 0.7380, 0.7550. Nevertheless, the level 0.7380 is the key, it will be not easy to pass it. A rebound is possible from the level 0.7380.

A reverse scenario is associated with the breakdown of the support level 0.7240 and the decline towards the lower limit of the upward channel and the level 0.6975 (EMA200 on the daily chart). The return of NZD/USD pair below the level 0.6860 (Fibonacci level 23.6%) will increase the risks of NZD/USD pair returning to the downtrend.

Support levels: 0.7290, 0.7240, 0.7115, 0.7085, 0.7050, 0.6975, 0.6930, 0.6900, 0.6860
Resistance levels: 0.7380, 0.7420, 0.7550

Trading recommendations

Sell Stop 0.7270. Stop-Loss 0.7310. Take-Profit 0.7240, 0.7115, 0.7100, 0.7085, 0.6975, 0.6900, 0.6860
Buy according to the market. Stop-Loss 0.7280. Take-Profit 0.7320, 0.7380, 0.7420, 0.7500, 0.7550

In the upward channel
In the upward channel

Indicators recommend long positions
Indicators recommend long positions