Forex technical analysis: NZDUSD slides to new session lows
RBNZ hints at loan restrictions and this helps trend the market lower
The NZDUSD is weaker on the back of the RBNZ signaling that they may change the rules on lending to property investors.
House prices are rising sharply in Auckland as a result of speculation and inadequate supply. A rising housing market is usually tackled by raising rates. However, the RBNZ is reluctant to do so given their overvalued currency and declining oil prices which have already lowered inflation. A restriction on investment could lower the demand for housing, steady prices and allow the RBNZ increased flexibility in trying to control the value of the NZD through interest rate reductions. That is the fundamental story
From a technical perspective, the NZUSD has been banging against resistance at the 0.7608-16 area over the last week or so trading ( see daily chart above). That level represents the low swing price going back to December 9, 2014 (at 0.7608) and January 5 (at 0.7616). The 61.8% retracement of the move down from the January 2015 high to the February 2015 low also comes in in that area (at 0.76166).
The inability of the NZDUSD price to extend above that area - coupled with the fundamental backdrop - has contributed to the bearishness in trading today for the pair.
Looking at the hourly chart (see chart below), the price is approaching a key support level at the 0.74458 level.
This area was a ceiling going back to early February ( see blue circles in the chart below). On February 13, the price moved above that level and has been able to stay above that level apart from maybe 8 hours on February 24. The level also represents the 38.2% retracement of the move up from the February low to the February high (see chart below).
The pair is on a trend move to the downside today with little in the way of corrections. Looking at the 5 minute chart below, although the corrections have been modest, the pair has trended down in a defined channel. Currently, the extremes of the channel come in at the 0.7470 above, and 0.7442 below (and moving lower). With support on the hourly chart at 0.74458, this is another reason to expect a slowing of the trend for the time being.
Having said that, I do expect that on a corrective move, that resistance against the 100 bar MA on the 5 minute chart would attract selling interest (see blue line in the chart below). That moving average currently comes in at 0.7485 (and moving lower). If that does not hold, the 200 bar MA (green line in the chart below) is dragging behind at 0.7512 currently (also moving lower). Typically, the market is not in that great a hurry to trend the other way after a move like today. The fundamental back drop and technical bias seem to be in synch as well.