Trade Of The Day: NZDUSD Setting Base For Broader Correction
Trade Of The Day: The Reserve Bank of New Zealand left the Official Cash Rate unchanged at 2.50 percent after cutting four times last year. The New Zealand dollar fell more than half a US cent after the Reserve Bank of New Zealand said further policy easing may now be required, having previously highlighted that it would not cut rates further. NZDUSD fell from 0.6485 to 0.6425, slightly more than markets expected given such an outcome. That may have been due to Fonterra’s milk price forecast downgrade shortly before the RBNZ announcement.
Technicals: NZDUSD’s challenge of the recent high has once again led to a rejection lower. This completes a bearish “outside” day, turning the risk lower for a test of .6411/07. A break lower can challenge the recent lows at .6347/40, followed by .6300 where I would expect fresh buying to show. Resistance shows at .6472, then .6534, with a break above .6560 needed to see strength back for the mid-January high at .6590.
Trade Idea: Drawing on a symmetrical technical pattern whereby the NZDUSD looks to be setting a base similar in structure to that witnessed in September 2015, I am looking to venture long on retest of .6350 or a break of .6570. I would also point attention towards my report on a January overshoot effect particularly prevalent in NZD. My first target for this long is .7000, with .7300 in extension.
Trading Update: Stops to entry .6570
Trading Update: Stops to entry .6670
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