Declining Kiwi opportunity?

By John Sheridan, Trade With Precision

 

The New Zealand dollar has been showing weakness in recent times against a variety of other currencies, while the US Dollar has been showing strength. Those conditions meet one key provision for a potential trading opportunity. Today we’re going to look at NZD/USD, which is looking interesting to me across multiple timeframes.

Looking at the Monthly chart below, we can see that this pair has been in a down trend for a large portion of 2018, having made a lower high and lower low, while breaking through support around the 0.67800 level.  The Moving Averages (MAs) are confirming the trend with the 10, 20 and 50 period MAs all flowing downwards in a fanning pattern, and the 200 period MA just about to come into alignment.  The MACD and RSI are also converging, which confirming the momentum of the trend.  

On the Weekly chart, the bearish structure is more apparent.  We can see that price action on this timeframe is in a downtrend, with all four MAs in the optimal geometry and price flowing downwards, pulling back to the MAs before taking the next leg down.  Price has gone through the psychological round number of 0.65000 which could act as resistance if retested from below. Again, the trend is indicating bearish MA geometry.

Moving our analysis down to the Daily chart, we see a downtrend with bearish indicator convergence which could confirm the trend momentum. This could indicate a confirmed downtrend across three timeframes, which lends itself to a potential short swing trade.  

You’ll notice that price has now pulled back to retest the 0.65000 level and the price has possibly rejected the level by forming a small and indecisive candlestick, which could signal a change in direction.  If today’s candle breaks below the low of yesterday’s candle, I will be looking for opportunities to go.  I will possibly look to take this as a swing trade on the daily chart or, look for a lower timeframe entry giving me a more favourable risk to reward ratio.

So for now, NZD/USD is most definitely on my watchlist as a trend across the Daily, Weekly and Monthly timeframes, coupled with a pullback to a possible level of resistance.