NZD/USD Breaks 50-SMA, More Losses Likely

NZD/USD Breaks 50-SMA, More Losses Likely

NZD/USD Breaks 50-SMA, More Losses Likely

NZD/USD was one of the day’s worst performing currencies and now 5 trading days have past without a rally. This weekend’s disappointing Chinese trade numbers impacted both Australia and New Zealand but last week, AUD fell more sharply than NZD and this week the New Zealand dollar is catching up as investors bet that the RBNZ will need to ease again soon. Although China reported a larger than expected trade surplus, the improvement was driven by a staggeringly large decline in imports. China is New Zealand’s second most important trading partner behind Australia and the cutback in demand points to ongoing weakness for the world’s second largest economy. That combined with the recent slowdown in Chinese manufacturing activity and decline in dairy prices highlights the challenges ahead for New Zealand’s economy. As such we are looking for additional losses in the currency.

Technically, the recent break below the 50-day SMA and the 23.6% Fibonacci retracement of the 2015 to 2016 uptrend signals a deeper slide for NZD/USD. At minimum, we see a move down to support near 0.6725, a level where the 38.2% Fib retracement and the 100-day SMA converge. If that is broken, then it should be smooth sailing to 66 cents. However if NZD/USD rises back above 69 cents, the downtrend will have broken.

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