The New Zealand dollar continues to be polarised by the recent election as the NZ parties continue talks to form a government for the next four years. Except for today as the NZD really did see some price action as markets surged back into gear on a weaker USD. This was a bit of a surprise given that many had expected the NZD to be a bit flat until an announcement but the USD weakness certainly brought the bulls into the market. Further adding a bit of pressure was the manufacturing PMI coming in at 57.5 (57.9 prev) which was well above the long term average of 53.4 so a positive sign for the NZ economy. Obviously the Reserve Bank of New Zealand will be focused on this vote of confidence in the wake of some much uncertainty around who will govern NZ. Tomorrow is also expected to be a big day as the expectation is real that we will see some news on who will likely lead NZ and this could see some strong fluctuations for the NZDUSD and other NZD major pairs. At present it’s too close to call and anyone could be caught off guard by the politics at hand.
For technical traders the bullish move today was a strong one after the market had bottomed out at support around 0.7054. Expectations for movements lower had been there, but the USD weakness caused a reversal of fortune after the most recent bearish run. Moving higher though is likely to be a problem with stiff resistance at 0.7166 and the 200 day moving average coming into play, which will likely add strong selling pressure. If the bears are to strike it will be around this key area, and it will be unlikely they will let it jump higher to 0.7219. Any movements lower from the bears would also struggle strongly at 0.7045 – so we are certainly in for a tough battle. Further extensions lower though would target key levels at 0.6983 and 0.6921.
Another contender for mover of the day was the EURNZD which for some time has been an aggressive bull on the charts. After hitting resistance at 1.6739 it has fallen sharply today on the back of the resurgent NZD. If the NZD does push lower it could target key support levels at 1.6368 and also 1.6154. However, what is plain to see is that the 100 day moving average which is charging up the chart is also acting as dynamic support and would likely to be a strong turning point for the bulls if they came into contact. I would also be focused on a channel forming which I’ve added in for guidance as the EURNZD does like to trend and play within a nice trending pattern which tempted. Resistance levels can be found at 1.6739 and 1.7000 with the potential to go higher if we see further NZD weakness in the long run.