NZD/USD: Capped at Fibo level ahead of 20-DMA
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NZD/USD: Capped at Fibo level ahead of 20-DMA

  • The NZD/USD has been capped by a Fibonacci level on the way towards the 20 DMA.
  • NZD/USD is currently trading at 0.6540, between a range of 0.6540 and 0.6559.

We have seen some downside in the bird in an otherwise slow holiday market with both the UK and US out on holidays. The Kiwi has dropped 0.15% while trade tensions between Beijing and the U.S. weigh on investor sentiment. We are already seeing signs that the prolonged trade spat between the two nations is having a negative impact on China ahead of this week’s PMIs. Just recently, the Industrial profits fell 3.4% YoY YTD in April and the falling trend could well continue for most of 2019.

The week ahead

For the week ahead, U.S. GDP second reading will be a focus, although PCE could make a bigger impact on the market with respect to the Federal Reserve. “We expect a solid 0.2% m/m increase in core PCE prices, which should translate into a steady 1.6% y/y inflation rate with rounding. Risks are skewed to a softer print, in our view,” analysts at TD Securities argued. “We look for muted consumer spending after an outsized 0.9% m/m jump in March. The choppiness in the spending data should fade as tight financial conditions and delayed tax refunds recede from view.”

It is a relatively quiet domestic calendar for the bird, although we do have the ANZ business outlook survey (BOS) for May coming up this week. Analysts at TD securities are looking
for a decent rebound in both confidence and own activity. “Businesses are responding to the welcome news that the prospect of a capital gains tax has been eliminated by PM Ardern while she is in government (prior -38 and +7, respectively).”

Elsewhere, China will remain a focus with PMI on the card where signs of damage from worsening trade tensions with the US could play into the bear’s hands. Traders will be looking for the indicator to drop back into contraction territory.

NZD/USD levels

The bird was unable to hold above the 78.6% Fio retracement of October 2018 to current price’s range and as such, has failed to cross the gain line which would be the 20 DMA up at 0.6571. However, daily stochastics lean bullish and the next target on a break above the 20 DMA would be 0.6580 double bottom ahead of a surge towards 0.66 figure guarding 0.6630. On the downside, 0.6480 is a compelling level being the 23rd May swing low. Beyond there, eyes will be on the 0.640s an Oct 2018 lows.

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