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Today’s Trading Edge: NZD/USD – Kiwi Finds Support but Will this Rally Fade Away?

Posted by Edward Moya on Aug 4, 2014 9:08:00 AM

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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

Technical Strategist

WorldWideMarkets Online Trading


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