steve.jarvis's picture

have a look at this - The Kiwi is attempting to take flight!

Technically speaking, there has been two main changes in the FX markets over the past week. 1/ A softening of Sterling, the extent of which means it is now in danger of breaking down from medium-term uptrends. 2/ A steady improvement in the New Zealand Dollar.  The Kiwi is no longer in the "relegation zone" alongside the Japanese Yen, Norwegian & Swedish Krona, but over the short-term it also appears to have leapfrogged the Australian Dollar & Euro.  It is now only just outside the "top spots" which are currently occupied by the US & Canadian Dollars, Swiss Franc & Sterling. 

At present it is too soon to be talking in terms of the New Zealand Dollar making further significant progress up my trend-based table, but the improvement against the likes of the JPY, NOK & SEK appears to have potential to persist for quite a while.  Potentially this could also be the case against the AUD & EUR, but further work is needed here before longer-lasting Kiwi strength is confirmed against those currencies.  I have analysed the Kiwi against six currencies and to put the price action into perspective, I'm using weekly candles with a 4 year time-frame, using 13, 52 & 260 week moving averages (IE 3 months, 1 & 5 years), which in my experience are the best combinations for identifying longer-term trends.  

I have started by looking at the Kiwi against the Yen and Scandinavians, before turning to the Aussie & Euro and also looking at GBP/NZD to see whether the aforementioned Sterling deterioration looks like persisting.  On this occasion I'm showing all of the charts with NZD on the left side - IE up is bullish for the NZD. This is not the way that some of the NZD rates are normally quoted, but from an illustrative viewpoint it can make the picture clearer.  It's one of the beauties of using the Tradermade's Maverick charting platform - you can display FX pairings which ever way suits you.  By the way, a new version of Maverick is due for release any day now, with loads of new features.  If you'd like a trial, please get in touch.  Anyway, that's enough of the sales pitch for one day!

NZD/JPY. A very bullish looking chart, a failed head & shoulders top, bullishly aligned & rising moving averages, all suggesting resumption of the major uptrend.  Could see an initial advance towards 96, with the 100-103 area possible over coming months. Look for the former head & shoulders neck-line near 86 to revert to solid support on a reversal, but more likely to leave a higher low above there by the 87.50-88.50 area.

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NZD/NOK. Again, a pretty bullish looking chart. Major trend including all moving averages are bullishly aligned & rising, advancing strongly from the (bullish) failed downwards break a couple of months ago.  Likelihood of the 5.45-5.50 area providing an initial cap to gains, but then see scope for a dip to leave a key higher low (at an ideal maximum of 5.05-5.15 area) and set up a further decent advance, possibly as far as the 5.95-6.00 area over the medium-term. 

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NZD/SEK. Another potentially still bullish chart. However, following the latest rally, we now need to see a dip leave a higher low above the 5.60 line to avert the risk of a possible head & shoulders top being formed for a deeper initial retracement of the 2013-2014 advance.  Successfully leaving a higher low, ideally by 5.70, would bode well for an initial return towards the recent 6.02 peak, raising hopes of a move towards 6.10 and possibly the 6.25-6.40 area over the medium-term. 

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NZD/AUD.  Attempting to develop a base after retracing between 23.6% & 38.2% of the 2011-2014 advance.  Although the long-term trend remains bullish for the NZD, we see the risk of initial strength being short-lived, establishing a lower top beneath June's one and setting off a further (but still corrective) retreat over coming months.  A move through the late 2013 higher low towards the 3-4 year uptrend / 50% retracement of 3 year rise could occur prior to attempts to resume the longer-term uptrend.

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NZD/EUR.  Potentially bullish, the recent low having been almost spot-on the 3 year uptrend line.  However, a succession of lower tops exists from the 2012 peak, with scope for a tightening range to develop over coming months ahead of a clear directional signal being generated.  With the major underlying trend up, we favour an eventual bullish resolution, setting up an initial return to the 2013 & 2012 highs.  Successfully leaving a higher low thereafter could pave the way for a significant further longer-term advance.

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NZD/GBP.  Arguably the least positive of the NZD charts featured.  Key support from 2011 / 2012 came back into play a couple of months ago and this has triggered a rally.  However, at this stage the rally looks corrective and we are wary of a key lower top being left below the 2013 peak, ideally by former key resistance at the 2011 & 2012 highs, ahead of a deeper retreat in the direction of the 2011 higher low. 

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