Kiwi dollar adamant to give up 6-year lows, Chinese spillover effects adding downside pressures

In our earlier posts we described leading technical indicators tend to signal NZD/USD could have trend reversal but the Chinese slowdown not only had a direct impact, in terms of the export of Kiwis dairy products and in terms of its prices as well, but the spillover of the cost that has to economies around Asia, dairy prices dropped to a twelve and half year low in August as the slowdown in China, the scale of the impact was obvious in the fact that the current dairy payout to farmers from Fonterra was the lowest in real terms since 1912.

As a result Kiwi dollar continued with losing streak that has begun from mid April now it is making an attempt of recovery a bit. The pair currently held strong supports at 0.6200 levels from one and half months. You can observe on the monthly charts for the historical evidence as to how the pair has behaved when RSI and stochastic curves have reached oversold zone.

An inverted hammer candle is occurred on weekly charts at the downswings and the trend on this chart started showing slight recovery as the RSI (14) has reached oversold zone but was uptrend could not sustain. But when we plotted monthly charts while formulating long term hedging framework, we believe trend reversal is quite puzzling. RSI on monthly chart has approached oversold territory and tend to show upward convergence at 29.0310, while %K line crossover on slow stochastic curve is seen below 20 levels which is oversold zone again. (Currently, %K line trending at 5.0210 and %D line at 4.7246). Overall, Kiwi dollar after a long lasted losing streak that was started from last 1 year or so to hit almost 6 year's lows, but for now it has all chances of change in its direction.

As Kiwi's dairy industry has been foundation stone of the New Zealand's economy - crumbles under the pressure of a supply glut and slowing demand out of China. Bu we believe any positive drivers to this effect should certainly prop up NZDUSD.