The NZDUSD pair has come a long way from my last post (click here). Looking at its 4-hour chart, you can see that it has recently broken out from a double bottom formation. Now, a double bottom is generally seen as a downtrend reversal pattern. Given this, the New Zealand dollar could rise against the USD in the short term. With stochastics still far from the oversold area, the pair could hover for awhile above the pattern’s neckline before continuing its ascent. Once it does, it could aim for its previous high just below the psychological 0.7300 marker. On the other hand, if the support at 0.6900 gives way, the pair could fall all the way back down until it finds support at the trough of the pattern which is around 0.6550.
Fundamentally, the Kiwi’s recent rise was helped by the improving optimism in the markets. There was a nice rally to end last week when the US’s University of Michigan consumer sentiment index surpassed the market’s forecast. Traders’ optimism was sustained come Monday when the euro zone’s industrial production also exceeded the market’s expectations. Yesterday, a rally once again occurred when the 11th straight month of rise in the Federal Reserve Bank of New York’s manufacturing index added signs that the rebound in the global economy is withstanding the debt crisis in Europe.
Now, the data that will be coming out of the UK and the US will likely sway the Kiwi’s short term valuation. The UK’s May retail sales are seen to have printed a 0.1% after rising by 0.3% the other month. Back stateside, the latest initial jobless claims are expected to taper a bit to 452k from 456k. Though, its Philadelphia Fed Manufacturing Index is likewise projected to soften to 21.1 from 21.4. However, the recent jump in the New York Fed Reserve manufacturing index could also indicate a possible better than projected result in the former’s number as well. In any case, any positive suprise from these accounts could buoy the anti-dollars like the NZD.