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NZD/USD: nearly a year in downward trend on 17.06.2015


17 June 2015

Current trend

Trade deficit in New Zealand in the first quarter rose to 3.6% of GDP, compared with 3.3% in the fourth quarter of 2014. Following this news, the pair has fallen 30 points since opening today. The major cause of the growing trade deficit is the falling price for dairy products, the main source of export for New Zealand.

Further pressure to the NZD was added by the 25 basis points rate cut performed by the government on 11 June. Relatively high rate of 3.25%, at the same time, remains the main source of support to the currency.

Today markets are waiting for the Fed’s statement regarding the future possibility of the rate hike in the US, which is due at 9 pm, and the head of the Fed Janet Yellen speech at 9:30 pm. Economists do not expect immediate rate cuts.

In the medium term, the NZD is expected to keep falling, while the Bank of New Zealand forecasts the currency is going to drop to 0.6800 by the end of the year.

Support and resistance

From July 2014, the pair is moving along downward channel from the level of 0.8830. All indicators on every chart, starting from 4-hour and upwards, remain in sell zone. The important level of 0.7100 (EMA200) is broken down. Thus, only short positions should be considered, with any correction as an opportunity to open a short position at a better price.

Support levels: 0.6930, 0.6850.

Resistance levels: 0.7050, 0.7090, 0.7100, 0.7185, 0.7200, 0.7220, 0.7275, 07300.

Trading tips

Open short positions from 0.7000, 0.7045, 0.7085, and 0.7100 with the target at 0.6800.

Alternatively, opening long positions would be viable after the breakout of 0.7220 with targets at 0.7300, 0.7450 and 0.7540.

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