FxWirePro: NZD/USD Bulls Banks On Triangle Breakout, Bears Negotiate With Triple Top – Directional Hedging Best Suitable

NZDUSD short-term perspectives: After the pair drops below 0.6650 levels and show -0.48% losses yesterday, support at 0.6600 looks vulnerable. A breakdown would then target the 0.6500 area. The current price has slid below 7 & 21-DMAs with bearish MACD crossover with most likely bearish DMA crossover as well given the continued price slumps.

The medium-term perspectives: As stated in our posts in the past, hammer & dragonfly doji patterns have taken-off rallies, in between shooting stars counter at the stiff resistance but bulls shrugged-off and peaked up to 0.6725 levels. For now, the minor trend appears to be little weaker upon spinning top formation, while both leading and lagging oscillators also substantiate this weakness (refer daily chart).

The potential for a near-term pullback to the 0.6500 area, followed by a resumption of the three-month old rally beyond 0.6750. We have a positive outlook for the NZ economy in 2020, while global risks are expected to persist.

On a broader perspective, the major downtrend is extended on triple top formation but most recently interim bulls are buzzing as it has broken-out triangle resistance. 

While bears resume slide back below 21-EMAs capitalizing on further potential on above-stated bearish pattern (refer monthly chart). 

RSI oscillator, on this timeframe, shows faded strength at 57 levels, downward convergence to the prevailing downtrend and forms lower lows, while stochastic curves are little indecisive. As a result, bears appear to be extending further on the triple top formation.

Trade tips: At spot reference: 0.6623 levels (while articulating), we recommend directional hedges that comprised of longs in NZDUSD futures contracts of January’20 delivery, simultaneously, shorts in futures of March’20 delivery for arresting bearish risks in the major trend. The short leg is likely to hedge potential slumps and the momentary upside risks can be arrested by the long leg. Thereby, one could be able to directionally position in their FX exposures on hedging grounds ahead of US non-farm data and inflation numbers.