Another day, another batch of election news. This time the Kiwi gets it.

So, New Zealand’s First Party has sided with Labour to swing them into government, and now the National Party are packing their bags and heading for the opposition benches (if that’s how it works over there).

Traders don’t like upsets from the status quo, and thus NZDUSD has suffered. Howwver, if the Kiwi’s quickly shore up the political scene and bring stability, the currency could well recover.

We’ve had quite a substantial break coming from up near 0.7200 and the break of 0.7050 has been key.

NZDUSD daily chart 19 10 2017 2

NZDUSD daily chart 19 10 2017 2

The 0.7050 area has been a strong S&R level going back through 2016. NZDUSD had found a nice range between there and 0.7200 but this break could be significant. That level has already found resistance agianst 0.7040/45 and that’s cemented the break, with the pair still scratching out new lows at 0.7013 as I type. We should expect to see some better support against the 0.7000 big figure. This current move has taken us below the 2015 trend line, and the 38.2 fib of the 2015 swing.

The next key level for me is around the 0.6950/70 area, being yet another strong S&R point. If we are to see a few more sessions of weakness while the politics get sorted out, this might be a big enough level to stop the rot, and indeed bring a bounce. Technically, if I was short it looks good to take some profit, or to take a long trades from, as a tight stop can be placed just under 0.6940. I’m going to keep an eye on this level with a view to taking a long. depending on how the news plays out, and especially still with one eye on the Fed/US side of the trade.

As with every political event like this, it’s wise to let the noise die down a bit before committing to any big trades but if you stick to the levels in play like any other trade, you shouldn’t get hit by any surprises.

Ryan Littlestone

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