As a major trading partner of New Zealand and Australia, China has a very strong influence on the economies of these countries. And a recent nosedive in the Chinese stock market directly affects the economy both of Australia and New Zealand. But, curiously enough, despite the non-stop decline since the beginning of May 2014, the pair NZD/USD found a support at 0.6620. The New Zealand dollar is strengthening in the cross-pair with the Australian dollar as well.
The pair NZD/USD is still affected by the following fundamental factors: the decline in global diary prices, reducing Business Confidence in the country, low inflation, increased concerns about the possible Chinese economic growth. Another factor is the probable series of interest rate cuts from the current level of 3.25% to 2.5% by year end.
FOMC meeting minutes are released today at 21:00 (GMT +3). This information deeply influences the U.S. dollar in the medium term, as traders hope to clarify the situation over the prospect of interest rate growth in the U.S.
Support and resistance
The pair NZD/USD is still heading towards 0.6435 (61.8% Fibonacci), 0.6000 (2006 lows) and is trading at the 5-year lows, having broken through the resistance level 0.6890 (50% Fibonacci correction to the growth from 2009 to 2011).
OsMA and Stochastic lines on the daily timeframe are moving into the buy zone; but on the 4-hour chart they indicate long positions. However, given the fundamental factors, local strengthening of NZD/USD should be considered as an opportunity to enter short trades from levels 0.6700, 0.6735, 0.6800, 0.6850. It is necessary to take into account the indicators on the 4-hour and daily charts - they give buy signals.
Support levels: 0.6620, 0.6565, 0.6435.
Resistance levels: 0.6800, 0.6890, 0.7000.
Open short positions from current levels and levels 0.6700, 0.6735, 0.6750, 0.6800 with the targets at 0.6600, 0.6450 and stop-loss at 0.6850. This scenario is worth considering until 9 p.m. (GMT +3).
Open alternative long positions after the breakout of 0.6890 with the targets at 0.6900, 0.6950, 0.7000.