The New Zealand Dollar, otherwise know as the kiwi, has been the dog of currencies over the second half of summer. In particular, the NZD/USD is down almost 500 pips since July 22nd. Fundamentally, this move is primarily due to fears of the trade war between the US-China. Because New Zealand is so heavily dependent on China to buy its products, fears are that a slowdown in China would mean a slowdown in New Zealand. Earlier in August, the Royal Bank of New Zealand surprised the market by cutting interest rates 50bps (a 25bps cut was expected). At the time, RBNZ’s Orr noted that “nothing is off the table”, referring to the possibility of interest rates moving lower.
This weekend could be a big tell as to what the RBNZ may do at their next meeting. As my colleague Kelvin Wong previewed earlier today, China is due to report is national PMI over the weekend. On Monday, the more widely followed Caixin PMI is to be released. What if this data is better than expected and more importantly for the kiwi, can it bounce?
The kiwi is currently putting in lows now seen since 2015. However, technically, there is a cluster of Fibonacci extensions around the current NZD/USD price level of 0.6300. Fibonacci extensions can act as support, especially when a currency pair seems to be moving into no mans land. Below is the list of Fib extensions:
Dates Low High Fib extension
Oct 8th – Dec 3rd (2018) 0.6424 0.6969 127%
Jun 14th-Jul 22nd (2019) 0.6487 0.6790 161%
Aug 7th - Aug 9th (2019) 0.6376 0.6498 161%
Source: Tradingview, City Index
If the Fib extensions can act as support, and perhaps the data out of China this weekend is better than expected, the first level of resistance is at 0.6376, which is the lows on August 6th. After that, the pair can bounce up towards 0.6500, which are prior lows that now act as resistance.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.