NZD/USD yesterday retraced the losses and closed above the trendline support, leaving a hammer candle on the daily chart which shows some real strength in the price action. The pair might resume the upside movement today, exposing the channel resistance on the daily timeframe.
As of this writing, the pair is being traded near 0.8623. A hurdle may be noted around 0.8629 that is the channel support and 50% fib level. A break and daily close above the channel support will confirm the bullish bias, opening doors for 0.8745, the swing high of the previous wave as demonstrated in the following chart.
On the downside, the pair is expected to find support near 0.8578, the intraday low of yesterday, ahead of 0.8568, the 76.4% fib level and then 0.8514, the swing low of the previous wave. The long term sentiment remains bullish as far as the 0.8514 support area is intact
New Zealand Inflation
On Tuesday, Statistics New Zealand released the Consumer Price Index (CPI) report which is considered a main gauge for inflation. The CPI came out worse than expectations, printing 1.5% in the first quarter as compared to 1.6% in the same quarter of the year before missing the median projection of 1.7% increase. New Zealand Dollar fell broadly after the CPI report but the recent rate hike encouraged buyers to control the price.
China, one of the largest trade partners of New Zealand, grew at 7.4% in the first quarter, more than the average forecast of 7.3%, the government data revealed yesterday. The report spurred optimism that the stronger recovery in China might increase the New Zealand trade balance.
Buying the pair on a daily close above the trendline support appears to be a good strategy; the stop should be placed just below the trendline while the target can be around 100 pips.