NZD/USD: bulls charge down the 200-D SMA on Powell shift to dovish rhetoric

• NZD/USD has been given a new lease of life following a dovish shift from Federal Reserve’s governor Jerome Powell and has taken flight from the pivot’s confluence with 38.2% Fibo/10-D SMA, vaulting R1 an R2, to meet R3 and consolidate at the 200-D SMA, (0.6869) for a five-month high.
• NZD/USD’s next major risk event is just around the corner when Xi and Trump will dine on Saturday at the G20 summit, and potentially set out a framework for negotiations concerning trade.

NZD/USD, along with its peers, jumped at Powell’s “just below” neutral comment, which weighed heavily on the greenback, with the DXY plummeting 50 pips on the knee-jerk. The DXY is now crashed to a low of 96.69 at the 38.2% fibo and is sitting just shy of the 26th Nov low which meets the trend line support from business traded vs the greenback on the 20th Nov which is a crucial level; If it were to give, the dollar could slide all the way back into levels down in the mid 95’s again, last traded on 7th November, which could put the bird on a flight path towards the summer highs and the 61.8% Fibo of the 2018 downtrend at 0.7045.  

• Fed’s Powell: No pre-set policy path; paying ‘very close attention’ to data

However, analysts at ANZ Bank New Zealand suggest that “perhaps the initial reaction has been a little aggressive and could be faded today (and ahead of the G20), but it will keep markets on edge around future USD strength.” If that is the case, a mean reversion back to 0.6820, at least, could be on the cards in NZD/USD and the DXY would target around 97.20 as the 50% retracement of the day’s range.  

Next major risk comes with Xi and Trump

Meanwhile, the next major risk comes with Xi and Trump meeting this weekend, supposedly meeting for a dinner date on Saturday to at least lay out a framework for negotiations concerning trade. Any initial sentiment that the two nations are seeking out a trade war truce will likely give global equities and risk appetite a much-needed boost into year end which would, again, be positive for the bird.

NZD/USD levels

• Support 0.6700  
• Resistance 0.6890

Strong economic data in recent weeks have  given flight to the bird and the 38.2% retracement fibo (at 0.6810) of the 2018 sell-off from 0.7441 highs to 0.6427 2018 lows is now likely a base from which the Kiwi can continue higher towards the initial 50% fibo 0.6922  target. Below the said support, bears will have eyes on the 21-D SMA at 0.6741guarding 0.6680.