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Short term
/
Buy
Trade view / 18 October 2017 at 0:20 GMT

NZDUSD recovery potential ahead

Managing Director / Technical Research Limited
New Zealand
Instrument: NZDUSD
Price target: 0.7357
Market price: 0.7175
Background

Tuesday’s inflation update out of New Zealand came in largely as expected, at 1.9% year-on-year over the third quarter, and saw a small rally in NZDUSD, which soon faded. Volatile items such as food and energy gave the Consumers Price Index a temporary boost. Most analysts expect inflation to trend back down this quarter, perhaps back to 1.00%. Hence, the Reserve Bank of New Zealand will be holding its policy rate steady at 1.75% for the foreseeable future.
 
Meanwhile, traders await the end of drawn-out negotiations around the formation of a new government, post the September 23 election. The New Zealand First party will be the king (or queen) maker, returning to power the current prime minister, Bill English, and his centre-right National Party or handing the reins to 37-year-old newcomer Jacinda Ardern and a centre-left Labour Party/Greens coalition.
 
NZDUSD will rally 80-100 pips on a centre-right government and decline a similar amount in the event of a centre-left coalition. Bet on the former.


Management and risk description

From an Elliott Wave perspective the Kiwi has completed a 3-wave corrective structure from the late July peak of 0.7565 to this month’s 0.7050 low. There is also a (potential) developing falling wedge pattern on display (refer daily chart below).

Also, from a classical charting stand point, since September 26 the Kiwi displays a (potential) developing inverse head & shoulders reversal pattern (refer hourly chart below).

Support now lies around the mid 0.7100s, with a (sustained) break above 0.7200 resistance, establishing upside projections towards 0.7300 and 0.7350/0.7365 over the coming days.


Parameters

Entry: Today Kiwi is seen as a buy at market (0.7175).

Stop: Just under 0.7145, initially.

Target: 50% at 0.7297 and 50% at 0.7357.

Time horizon: Allow several days at least for targets to be met.


NZDUSD hourly chart (click to expand)
NZDUSD  Hourly Chart
 
Source: ThomsonReuters  

NZDUSD daily chart (click to expand)
NZDUSD  Daily chart
 
Source: ThomsonReuters  

NZDUSD weekly chart (click to expand)
 
Source: ThomsonReuters.   Create your own charts with SaxoTrader; click here to learn more


— Edited by Susan McDonald


Non-independent investment research disclaimer applies. Read more

A compiled overview of Trade Views provided on TradingFloor.com is found here
18 October
cashfactor cashfactor
Hi Max....surely this is a coin toss until,the government is known. We could have an announcement in 24 to 48 hours. Your projection over the next 7 days may well be correct, but if its a left wing govt your stop of circa 20 pips will be taken out by possibly 80 pips.
18 October
sutiani sutiani
Hi Max..for euro/usd still open buying EUR/USD about 1.1807 Stop: Below 1.1730, initially. Target: 50% at 1.1916,
18 October
Max McKegg Max McKegg
would actually work today's Kiwi stop in tandem with Euro. eg. want to see EUR/USD break 1.1735 to "confirm" Kiwi recovery view is not working out ... Re EURUSD ... Yesterday's forecast called for a Bottom at the mid 1.1700's, so Long now, with Stop at 1.1732.
18 October
Patto Patto
I agree with Cash Factor. Once the new government arrangement is announced, the Kiwi will gap up (or down) and a 20 pips stop loss trade could end up being done at 80 pips. All depends on the liquidity on Saxo's trading platform I suppose. Do they guarantee stops ?
18 October
Max McKegg Max McKegg
There will be no Political Outcome Today ... Tomorrow late afternoon
18 October
Murat's Martini Murat's Martini
NzdJpy formed a bearish fakey
18 October
cashfactor cashfactor
Max yes maybe tomorrow.....the point being ....your trade recommendation as you outline it wont have played out by then.....so unless you know the political outcome... its a pure gamble to place a trade now with a 20 pip stop loss
18 October
sutiani sutiani
Thank you
18 October
Max McKegg Max McKegg
Tomorrow is the NZ Electoral D-Day, will consider Hedging possibilities then
18 October
cashfactor cashfactor
sorry am i missing something.....there is no D day.....its when Winston says could be anytime....without warning....and your trade rec says buy now at market.....
18 October
Max McKegg Max McKegg
Tomorrow will be the announcement .... Watch EUR/USD as.. once that starts to trend Kiwi should follow
18 October
cashfactor cashfactor
Lol....you are still saying enter the trade now....or are you changing your mind?
18 October
Max McKegg Max McKegg
Can still be Bought but per above comments unless Kiwi sell-off decisively want to see EUR/USD break new S/T lows before giving-up on this call
18 October
FXKhaos FXKhaos
Thanks Max. I've learnt not to question a recommendation, but rather collaborate my own views and analysis with the recommendation. The ultimate decision whether to trade or not is mine. But yes, NZDUSD keeping us on our toes and polishing the crystal ball like crazy! ;-) !
18 October
cashfactor cashfactor
FX Khaos....I don't disagree with the rec that NZD will go up, I'm questioning the wisdom of placing a trade now with a 20 pip stop....less than 24 hours before a major political announcement that will move the market 50 pips at least in either direction albeit temporarily. What is worse, at the time the rec was originally made the announcement could have been imminent. It would have been good if Max could have acknowledged that.
18 October
Max McKegg Max McKegg
No announcement was ever coming today, I';m in NZ and know this. It will not be until later Thursday. Plenty of time to decide whether to hold position, add or quit.
18 October
Patto Patto
We all know the Kiwi is going to move 60-100 pips when the election result is announced. That announcement (or a leak) could come any time. Too late to jump on board afterwards. So I think Max's decision to post a trade now is fine..
18 October
cashfactor cashfactor
wow....Max the announcement was to be last Thursday then anytime after that and at 18.08 today Peters says tomorrow afternoon.....you didn't know anything different. Patto its a straight gamble when there is no evidence as to which way it will go and to have a 20 pip stop
18 October
marran marran
it looks like this is stopped out now anyway
18 October
Patto Patto
Follow the money ?....perhaps this price action in NZDUSD in an otherwise quiet session suggests the story has leaked: New Zealand is going to have a left wing government tomorrow.
18 October
cashfactor cashfactor
no its about the usd.....have a look at all usd pairs
20 October
marran marran
what are your thoughts on audnzd now max?
21 October
Max McKegg Max McKegg
welcome to request my latest analysis

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