Since forming a six year low on August 28th at the .6227 level, NZD/USD continues to rebound as commodity currencies recover with the dollar retreat from lower U.S. bond yields as market participants anticipate a dovish Fed for the remainder of the year.
Price action on the NZD/USD daily chart highlights the key rally that has accelerated as the price jumped above both the 50- and 100-day simple moving averages (SMA). The bullish move may now target the 200-day SMA which currently trades at the .7024 level. It is around that key level that price could also form a bearish butterfly pattern. If bullishness continues, we could see a major rally target the .7223 level, which is the 38.2% Fibonacci retracement of the .8834 to .6235 decline.
Initial resistance lies at the .6900 handle, and if that area is respected we could see price fall back towards the .6650 region. Major support will come from the 100-day SMA which currently trades at the .6604 level. If we see expectations grow for the Federal Reserve to hike in December, we could see further kiwi weakness target the .6400 area. The October FOMC meeting which concludes tomorrow the 28th, is likely to see the Fed continue to emphasize that they will wait for the next round of important data before giving any major hints on policy change.
The trade: Buy NZD/USD .6750, with a stop loss at .6650, and a take profit at .6950. The Risk/Reward Ratio is 1:2