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  • NZD/USD is on the back foot despite a softer US dollar.
  • Yields are potentially being suppressed due to the RBA.

NZD/USD is currently trading at 0.6576 between a low of 0.6571 and a high of 0.6600. 

The dollar bloc remains under pressure despite a pull-back in the greenback due to conflicting messages from the US President Donald Trump surrounding the fiscal stimulus negotiations. 

Analysts at ANZ Bank expect that weakness in the kiwi is likely reflecting the strong performance of longer end interest rates in New Zealand, which have held down as US yields have risen.

”Instead (NZ yields) have taken a lead from Australia, which are lower on the Reserve Bank of Australia’s dovish tone and expectations of cuts.”

Longer-term, the analysts continue to expect the NZD to range-trade around the 0.65 level, as it is now.  

As for the US dollar, there could be a surge to the upside if the bulls can commit to the current support structure.

In such a scenario the kiwi will come under immense pressure.

NZD/USD technical analysis

Following on fro the start of the week’s analysis, NZD/USD has played out just as expected it would:

NZD/USD Price Analysis: Head and Shoulders patterns in play

Daily chart from 5th Oct

4-hour chart from 5th Oct

It was explained that we had two supports to bypass.

On a break of the first support, a retest of it would confirm it as a new dominant resistance which could result in a break to the downside to bypass the second support. 

Current chart

As can be seen, the price has broken the support and bears will now be monitoring for a retest of the structure for a discount to enter short. 

However, that opportunity may have come and gone as we have already seen a retest of the 0.66 figure and rejection.

We have seen similar pin-bar tests and the pair bolt not to look back in both August and September.

1:3 R/R reduced risk setup

Considering we have already seen a restest of 0.66 the figure and the rejection, there is a 1:3 risk to reward opportunity by taking a short at market, placing a stop loss above the near-term highs (structure). 

However, this is a higher-risk trade and would require a reduced percentage at risk. 

The price is yet to fully retest the structure ad is facing two lots of support at this current phase of its break below 0.6600.