The New Zealand dollar fell to a new 2 ½ year low after a report showed that both Chinese exports and imports for the month of November came in lower than expected. While the overall difference provided a record high for the surplus reading which came in at $54.5 billion, the reaction was bearish for the commodity currencies as imports fell -6.7% y/y.
Price initially gapped lower to start the trading week and is tentatively breaking away. After the 9:07 PM EST Chinese release price broke below the .7670 support level and made a key low at .7640. With price continuing to make fresh lows the bearish trend appears firmly in place.
The NZD/USD daily chart displays the recent downward pressure that is currently trending below the 200-, 100-, and 50-day Simple Moving Averages. If the decline remains strong and continuous, price could target the .7550 level and form a bullish butterfly pattern. It is around that area that we may see a limited bounce higher. If we see a daily close below .7500, further downside may target .7250.
Major resistance will come from the bearish trendline that started from the November 17th high. A close above that level may open the door for further consolidation.
The trade: Sell NZDUSD at .7650 with a stop loss at .7700 and a take profit at .7550. The Risk/Reward Ratio is around 1:2.
Edward J. Moya
WorldWideMarkets Online Trading