NZD/USD Technical Analysis: Short Trade Setup Sought (28/08/15)
The New Zealand Dollar is struggling to maintain bearish momentum against its US counterpart after spiking to the lowest level in over six years. Prices are oscillating in a narrow range above the 23.6% Fibonacci expansion at 0.6406, with a break below this barrier on a daily closing basis initially exposing the 38.2% level at 0.6219. Alternatively, a push back above support-turned-resistance in the 0.6497-0.6521 area marked by the July 16 low and the 14.6% Fib clears the way for another challenge of the August 21 high at 0.6707.
From a tactical perspective, the absence of a clear-cut directional signal argues against committing to a long or short position at this point. Furthermore, the distance between the inner layer of near-term resistance (0.6497) and initial support (0.6406) is smaller than 20-day ATR (91 pips vs. 106 pips, respectively). This suggests the risk/reward parameters are skewed in opposition of taking a trade.
With that said, the dominant trend has firmly pointed downward since mid-2014, arguing in favor a preference for selling the pair. We will opt to remain on the sidelines for now until an actionable opportunity to do just that presents itself.