New Zealand Dollar Price Outlook:
- NZD/USD has consolidated for the better part of a month, narrowly holding above 0.6400
- NZD/JPY performed similarly, moving off the June highs and consolidating beneath 70
- NZD/CAD broke above a major area of resistance which has since transitioned to a more supportive role
New Zealand Dollar Forecast: NZD/USD, NZD/JPY, NZD/CAD Levels
Price action across many markets has become rather directionless in recent weeks and the New Zealand Dollar is no exception. Across a variety of pairs including NZD/USD, NZD/JPY and NZD/CAD, price has become coiled after weeks of consolidation which may, in turn, provide the ingredients for an eventual break out. Since sentiment has stood on a knife’s edge for weeks, forecasting direction across the pairs will be exceedingly difficult but opportunities can exist regardless of direction.
NZD/USD Price Chart: Daily Time Frame (January 2019 – July 2020)
In the case of NZD/USD, price has become ensnared between resistance overhead near 0.6600 and support slightly beneath 0.6400. After surging from its March lows, two-fold resistance near the 0.6600 mark has since capped further gains. Thus, any continuation higher would first have to surmount the barrier above, while a break beneath 0.6400 might allow for losses to accelerate lower and test the trendline projection drawn from the March and May swing lows.
Shifting our focus to NZD/JPY, we can see an eerily similar price formation – albeit with different technical levels to work with. To be sure, price has become coiled narrowly beneath the 70 mark. Without an obvious catalyst in the works, price may continue to fluctuate around the area for some time, while an eventual break may be solidified once price breaches the ascending trendline above near 72 or the nearby 200-day simple moving average.
NZD/JPY Price Chart: Daily Time Frame (February 2019 – July 2020)
A lot of chop can also be seen in NZD/CAD, only to culminate in very little progress for either pair in the year-to-date. Still, the lack of progress is not from a lack of trying as NZD/CAD recently broke above a descending trendline that has kept the pair contained since November 2016. What looked to be the beginning of a breakout has now been called into question.
NZD/CAD Price Chart: Daily Time Frame (October 2018 – July 2020)
With that in mind, a bullish continuation will rely on price remaining above the descending trendline and Fibonacci level at 0.8675. Thus, the break out is not dead yet, but it is severely threatened and a confirmed daily close beneath the trendline could pave the way for losses to accelerate.
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To be sure, risk appetite is crucial for a bullish continuation in both NZD/USD and NZD/JPY as the Kiwi is more sensitive to risk trends. A reversal in sentiment could see weeks of positive progress unravel for the New Zealand Dollar. The situation is a little bit more opaque with NZD/CAD, but price action over the last few months suggests the Kiwi is in the driver’s seat and as a result, it may stand on the precipice of a major break out.
–Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX