The New Zealand surged against the US dollar after the Reserve Bank of New Zealand (RBNZ) kept rates on hold at 3.5% and eased up on jawboning for a lower kiwi. Some analysts were anticipating a potential rate cut, so it should come as no surprise that the currency pair rallied strongly off the .7187 session low towards the .7320 area.
A Reuter’s poll showed that 11 of 13 economists believe that the next move from the RBNZ will be a rate hike. Despite the overall strong US dollar, the kiwi’s plummet from .8834 towards the noted low may have just found significant support.
Price action on the NZDUSD daily chart shows that the potential double-bottom pattern could support a bounce higher towards the 50-day SMA at .7515. If price is also able to break above the key trendline shown above, we could see an extended period of consolidating price moves.
In the event of a bearish collapse, key support will come from the .70 handle.
The trade: Buy NZD/USD at .7270 with a stop loss at .7220 and a take profit at .7370. The Risk/Reward Ratio is around 1: 2
Edward J. Moya
WorldWideMarkets Online Trading