In this article, I look at New Zealand dollar which is in the process of making what appears to be a bullish retracement / pullback.
This pullback is occurring as the US dollar bounces off support and speculators assume that sooner or later FED will have to fight inflation.
However, I cannot ignore the very strong bullish trend on New Zealand dollar against the US dollar (NZDUSD) since March of 2020. I think that this trend is still very strong and valid, therefore we will continue to look higher especially when we have only a three-wave decline as shown on the daily chart below.
Here, we project Elliott wave support around the 0.6790 area. I will of course be very patient as I monitor for a rally from this level… I like to wait for an intraday impulsive bullish Elliott wave structure to confirm a bullish turn. Patience is key at “do-die” levels.
NZDUSD Daily Elliott Wave Analysis Chart
At the same time, I am also observing the Euro against the New Zealand dollar (EURNZD) where there has been a recovery since February (that looks corrective in structure); it’s a slow and overlapping move so I think upside will be limited.
In fact, Elliott wave C might also be forming an ending diagonal – this is a pattern that normally occurs at end the of the higher degree structure, in this case an ABC move.
I also have to consider that stocks are still in a risk-on position so normally NZD will be strong as well, but it can be lagging due to pullbacks in the commodity markets. I think that commodities still have a lot of room left on the upside, so NZD can have some nice opportunities when trends resume.
At this point, it’s also important to mention that Bank of New Zealand (RBNZ) Governor Adrian Orr said that economic activity in New Zealand is returning to its pre-COVID-19 level, which sounds very promising for the currency.Â
EURNZD Daily Elliott Wave Analysis Chart
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Twitter: @GregaHorvatFX
The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
