NZDUSD - SHORT & INTERMEDIATE TERM BEARISH by DanV on TradingView.com
19 February 2013
Some say, NZD is new Gold and others feel that the New Zealand's Economy is strong and more towards dairy and agricultural produce and less reliant on mining commodity, hence the Bank of New Zealand will raise the Interest Rate, in turn that would be more supportive of NZDUSD continue to trend to the upside.
Last week Government Representative said that he sees NZDUSD continue to gain strength but cannot do anything to limit it. Even though he might be incline to think that strong New Zealand Dollar is good for the consumers as it would mean that they would benefit from cheaper import.
Beyond certain point it is hardly any wisdom as they are net exporting economy and would not fare well if the New Zealand Dollar continue to strengthen which could be become a disaster if they then also went on to put up the interest rate when all other major economies are engaged in some form of quantitative monetary easing.
However based on what the price chart it is not at all suggesting this apparent strength to continue in the short & intermediate term for the following reason:
1) Since the 2000 low it has formed 2 zigzag to the upside with top being in July 2011. Either we have this as major top, one that will not be challenged for many years.
2) Or that we have intermediate top that will be retested after the pair has experienced retracement in the order of 38.2% (= 0.70) or greater of the entire rise in the form of ABC zigzag, of which, it has already completed the waves "A & B" in the form of Flat correction and we have just topped, with a rising wedge which is Ending Diagonal when found in this position of the wave structure. This Ending Diagonal is accompanied by RSI momentum divergence at several degree on Daily & Intra-day time frame.
3) That the Wave "A & B" of the Flat contained abc Zigzag, therefore wave "C" now should be in 5 swings to the downside to 0.70 level or lower. If not then it might evolve into more complex sideways congestion pattern.
4) Last Tuesday's COT Report seems to suggest that the Commercials have started to reduce their long Exposure as the price still continued to progress upwards for rest of the week.
5) Last weeks Thursday & Friday's candles appear to be indicating potential bearish configuration.
6) Correlation chart of EURNZD & NZDUSD (Inverted) suggest NZD weakness over intermediate term.
Similar weakness is already evident in the AUD.