The U.S. dollar rallied against its major trading partners after Janet Yellen’s prepared remarks were released at 8:30 am EST. Tapering is expected to remain in place and her optimism appears to mirror Bernanke’s. The New Zealand dollar fell around 40 pips to .8290 against the U.S. dollar before stabilizing above the .8300 handle as the markets await Yellen’s testimony.
Price has steadily climbed from the February 3rd low of .8050 and will attempt to confirm the next leg up if price can close above the 100-day Simple Moving Average (SMA) which is currently trading at the .8275 level. The daily chart above is displaying a bearish hidden divergence. This technical setup identifies a lower high with price while the oscillator has a higher high. If valid, we may see price correct and target the lower boundaries of the consolidating triangle that has been in place since March 2011. If this technical setup is invalidated, a bullish rally may target the .8550 barrier.
The trade: Sell NZDUSD at .8320 with a stop loss at .8420 and a take profit at .8020. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading