The New Zealand dollar fell to a near 4 year low after the RBNZ released its first monetary policy decision of the year. The Bank said that the kiwi remains “unjustified in terms of current economic conditions” and that rates will stay steady for some time. They are anticipating the kiwi to have a “further significant depreciation”.
The NZD/USD weekly chart displays the bearish stance that has been in place since the double-top pattern formed last July. Recent weakness finally broke below the consolidating range of .7600-.7900. Now price may have another swift breakdown towards the .7000 handle. If we do see a rebound, .7350 will serve as key resistance. Only consecutive daily closes above that region would signal a potential pause with the bearish bias.
If we see a daily close below .7000, downside momentum may target .6867, which is the 50.0% Fibonacci retracement of the 2009 low to 2011 high move.
The trade: Sell NZDUSD at .7270 with a stop loss at .7340 and a take profit at .7130. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading