NZD/USD (daily chart shown above) shows that since breaking down below the 100-day SMA, price continued its bearish correction and has tentatively found support just above the 200-day SMA. Price has not traded below this key SMA since early February and is currently riding a three day bullish rally.
The pause in the kiwi selloff is benefiting from a key reversal in yields for U.S. treasuries. The slight miss with the U.S. NFP release has been the key trigger, but traders may not see a substantial drop in yields and thus an end to the U.S. currency pullback. The 10-year yield on US Treasuries is once again below the key 2.5% level and is currently trading around 2.48%
Last week, I targeted one last key drop below this current level, but the recent stabilization could support a slightly higher rebound, which I will look to fade. If we do see price resume its downward trend, a near-term floor could come from both the 200-day SMA and trendline support that began last August.
The trade: Sell NZDUSD at .8560 with a stop loss at .8600 and a take profit at .8480. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading