NZD/USD: Head and Shoulders Top? - Profiting with Forex (PFX)

NZD/USD: Head and Shoulders Top?

by S. Wade Hansen

The Reserve Bank of New Zealand (RBNZ) announced today that it is lowering interest rates from 8.25% to 8.00%. This announcement sent the NZD/USD dow to its lowest levels since the beginning of the year.

Many traders and analysts expect that this interest-rate cut is just the first of many from the RBNZ to try to stimulate a slumping New Zealand economy. If the RBNZ does indeed continue to cut interest rates throughout this year and into 2009, it will most definitely have a bearish effect on the value of the New Zealand dollar (NZD).

In conjunction with this bearish fundamental outlook for the NZD, as I look at the weekly chart of the NZD/USD, it appears that a longer-term head-and-shoulders top pattern may be forming.

If the NZD/USD can break down through the neckline at 0.7400, it could be the start of a bearish move that could take the currency pair down to 0.6900 or lower.

This is just a preliminary look at what might happen to the NZD/USD if the RBNZ continues to cut interest rates. We may see a bounce back up and off of the neckline at 0.7400 before we see a serious attempt to break down and through this level, but it is certainly something to watch.

Let me know what you think about the NZD/USD's chances here. I'd love to hear the feedback. What do you see fundamentally or technically that would support or contradict this analysis? We have a forum thread dedicated to discussing the NZD/USD. Leave your feedback there.

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Discuss (3 posts)

kausti

NZD/USD: Head and Shoulders Top?
Jul 24 2008 03:13:12

** This thread discusses the Content article: NZD/USD: Head and Shoulders Top? **

I have been in the AUDNZD long trade for a long time now and it's beautiful trend. Looks like it has some more legs to go. So if you don't want to be hassled with on again, off again USD, it's a nice option.

#4776

bpmwriter

NZD/USD: Head and Shoulders Top?
Jul 24 2008 23:22:11

I concur with kausti on the aussie kiwi trade. The pair should break 1.30 in no time and keep heading higher. I've started playing these less volatile relative strength pairs (eur/gbp, aud/nzd) because the whippiness in the dollar is driving me crazy.

#4783

swadehansen

Re:NZD/USD: Head and Shoulders Top?
Jul 25 2008 16:29:13

It gives me goose bumps to hear you guys talking like this. I love that you're moving to longer-term, stable, won't-blow-up-your-account strategies instead of trying to day trade faster during these volatile times. Strong work.

{mosloadposition cad}

#4787

Discuss this item on the forums. (3 posts)

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