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NZD/USD Technical Analysis - NZD/USD Trading: 2017-05-25
New Zealand dollar strengthens on positive economic data
The New Zealand dollar is rising since mid-May, and widening trade surplus in April was the last piece of positive news among recent economic data. Will the New Zealand dollar continue strengthening?
New Zealand's trade surplus widened in April from a year earlier. The bigger-than-expected merchandise trade surplus at 578 million New Zealand dollars (US$405 million) last month compared with a NZ$350 million surplus a year earlier, Statistics New Zealand reports. Data have been positive recently while the central bank’s decision on May 11 to hold rates steady at 1.75% was deemed dovish. The retail sales rose 4.6% on year in the first quarter compared with the 3.9% growth in the last three months of 2016 despite a slight decline in Westpack consumer confidence index to 111.9 from 113.1 in Q4. A reading above 100 indicates optimism. At the same time unemployment dropped to 4.9% from 5.2% in Q4. Positive economic data are bullish for New Zealand dollar.
The NZDUSD: D1 has been correcting upward since hitting 12-month low in the beginning of May. The price has approached the 200-day moving average MA(200) on the daily chart.
- Parabolic indicator gives a buy signal.
- The Donchian channel indicates no trend yet: it is flat.
- The MACD indicator is above the signal line and the gap is rising, which is bullish.
- The stochastic oscillator is in the overbought zone and falling, which is a bearish signal.
We believe the bullish momentum will continue after the price closes above the MA(200) and upper Donchian boundary at 0.7046. A pending order to buy can be placed above that level. The stop loss can be placed below the Parabolic signal at 0.6843. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop loss level ($0.6843) without reaching the order ($0. 7046), we recommend canceling the position: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Buy |
| Buy stop | Above 0.7046 |
| Stop loss | Below 0.6843 |
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