One of the currencies that we have been paying attention to for a long time is the New Zealand dollar and its behavior against the US dollar. The NZD/USD pair is interesting from the point of view of both technical and fundamental analysis. In addition, the exchange rate rose another day in a row, reaching levels not seen since mid-August.
From the beginning of October, so in just a month, the New Zealand dollar strengthened against its US counterpart by more than 4 percent and as a result, the NZD/USD exchange rate returned from levels we last observed a decade ago. The strengthening of NZD seems to stem mainly from the progress that was to be made on the trade agreement between the US and China, as well as between New Zealand and China.
NZD this morning rises the most among the major currencies traded against USD. Strengthening seems to be supported by statements of US Secretary of Commerce Wilbur Ross, who said that an initial trade deal with China could be signed this month. It is, therefore, the sixth day in a row when the NZD is strengthening, and in addition, New Zealand Prime Minister Jacinda Ardern said that her country and China have successfully concluded talks to improve the free trade agreement.
From the point of view of fundamental analysis, it's hard to get better information. In turn, from the point of view of the technical analysis, the structures that appeared on the chart may support a change of direction on the NZD/USD pair.
NZD/USD daily chart. Conotoxia trading platform
Two head and shoulder patterns appeared on the daily chart. One smaller already completed and the other larger, whose neckline is just being broken. If buyers manage to keep the price above it, then theoretically the target for the formation is in the region of 0.66650.
Given the record-breaking positioning of non-commercial investors in short positions, which are the largest in a decade, there are chances for the occurrence of a short squeeze. This could mean that such large short positions could be closed very quickly, which in turn could lead to further strengthening of NZD. As before, the NZD/USD pair was one of the most interesting to observe, so now it has not changed and it can still be an interesting market.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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