The New Zealand Dollar (NZD) extended upside movement against the US Dollar (USD) on Wednesday, increasing the price of NZDUSD to more than 0.7420 ahead of some key economic releases. The technical bias remains bearish due to a Lower Low on the daily chart.
Technical Analysis
As of this writing, the Kiwi Dollar is being traded around 0.7415. A support can be seen near 0.7343, the 23.6% fib level ahead of 1.7300, the psychological number and then 0.7175 that is the swing low of the last major downside move as demonstrated in the following daily chart.
On the upside, the NZDUSD is expected to face a hurdle near 0.7448, the 38.2% fib level ahead of 0.7532, the 50% fib level and then 0.7616, the 61.8% fib level. The technical bias will however remain bearish as long as the 0.7175 support area is intact.
NZ Markit PMI
Markit Economics is going to release the Purchasing Managers Index (PMI) data tomorrow (Thursday). According to the average forecast of different economists, the PMI remained 57.76 points in January as compared to 57.7 points in the month before. Generally speaking, higher PMI reading is considered positive for the economy thus a better than expected actual outcome will be seen as bullish for the pair and vice versa.
Trade Idea
Considering the overall technical and fundamental outlook, buy the pair on dips around the 0.7300 support area appears to be a good strategy in short to medium term. The trade should however be stopped out on a daily closing below the 0.7175 support as described above. It’s always recommended not to enter any trade with less than 1:2 Risk/Reward Ratio in forex trading.
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