Short-term Trading Idea FX NZD/USD – Bull Speculation: Possible Upward Correction On Pinbar

Trading opportunities for currency pair: a pinbar has formed on the daily timeframe. As part of a correction, it’s likely there’ll be some short-term growth. This should start following a break of 0.6490 with a 0.6570 target. After this, we’ll need to see what the market comes up with. If things go as usual, after a break in the trend line, the price should return back to it. In our case, it’s towards 0.6685. If the sellers fully close Friday’s candle on Monday, the NZDUSD growth scenario will be cancelled out. In this case, we should expect a weakening of the NZD to 0.6235.

Current situation

The first half of January ended up not so good for commodity currency currencies. The USD dropped against the JPY and EUR and strengthened significantly against the AUD and NZD.

Falling oil prices and the Chinese stock market crash had a negative effect on currencies. Due to this, the NZD/USD is down 5.47% since the start of the year to 0.6436, with Brent down 22.54% to $29.20 and the Shanghai Composite falling 17.97% to 2,900.97.

China has been undergoing capital flight and the state had been trying to stabilise the market situation via the use of mechanisms which bring trading to a halt, before deciding against their use. The Bank of China has spent over $512.6 billion USD from its gold reserves on stabilising the country’s financial markets. Devaluation can’t be avoided. The regulator is likely to allow the CNY to fall further until the situation on all financial markets improves.

Other than China and oil, the GDT Price Index for dairy production is having a negative effect on the New Zealand dollar. The last Global Dairy Trade auction on 5th January saw the GDT Price Index fall by 1.6% in comparison with the auction’s value on 15th December, 2015 to 718. Dairy is the main export produce of New Zealand.

Graph analysis

My selection of NZD/USD hasn’t come from me choosing willy-nilly. An M-shaped pattern has formed on the daily time frame. The trend line of the correctional pattern which takes it beginnings from 23rdSeptember was broken on 8th January. The rate dropped to the support from where it recoiled. In the end, a pinbar (hammer) formed.