The NZD USD continued to mount a strong comeback rallyfollowing the formation of the .6572 closing price reversal bottom earlier inthe week. The rally has already exceeded expectations, which is a sign ofhigher markets to come.
The NZD USD continued to mount a strong comeback rallyfollowing the formation of the .6572 closing price reversal bottom earlier inthe week. The rally has already exceeded expectations, which is a sign ofhigher markets to come. The chart pattern suggests that a double-bottom isforming at .6560 to .6572 which projects a rally to .7238. This move may takesome time to form. In the meantime, traders should watch for a change in trendto up on the daily chart following a trade through .6899. Don’t look for toomuch upside movement following the change in trend since .6942 to .7033 is amajor retracement zone.
Fundamentally, signs that the global recovery is back ontrack along with the 25 basis point hike by the Reserve Bank of New Zealandgave shorts a reason to cover positions and fresh longs to re-emerge afterseveral weeks on the sidelines.
Talk that the global recovery was back on track helped drivethe AUD USD to within striking distance of the last main top at .8550. A movethrough this price will turn the main trend to up for the first time sinceearly May. Upside momentum is building which should drive this market into the.8727 to .8883 retracement zone over the near-term.
European Central Bank President Jean Claude Trichet fueled asurge in the Euro late this morning by stating that the ECB would maintain itsliquidity measures but not increase or add any. Investors liked this newsbecause it indicted that the central bank felt confident in the economy. TheEuro rallied on the news after the table was set for a strong short-coveringrally.
The inability to break the Euro overnight after a hardsell-off late in the session on Wednesday triggered the start of ashort-squeeze this morning. Short-traders scrambled to cover positions asdownside momentum dried up after the European Union got its act togetherearlier this week and announced final plans to rescue its troubled members.
Technically the Euro is still in a downtrend, but a new mainbottom has been formed, creating a range between 1.2453 to 1.1876. This hascreated a retracement zone at 1.2164 to 1.2233. Based on the current upsidemomentum, this zone is today’s target.
In addition, two main bottoms at 1.2143 and 1.2153 are alsotargets, forming a huge resistance cluster at 1.2143 to 1.2164. With the maintrend down, don’t be surprised if fresh shorts get reapplied in this clusterarea. Some bearish traders still believe the sovereign debt situation will getworse before it gets better and the Euro will eventually trade down to paritywith the Dollar.
An easing of tensions in the Euro Zone is also helping totrigger a rally in the British Pound. This market is starting to run to theupside after a successful test of a retracement zone at 1.4499 to 1.4435. Thenext upside objective is 1.4769. A breakout over this price will change themain trend to up and should ignite a further rally to 1.4947 over thenear-term.
The USD CHF is losing ground at the mid-session. Thestronger Euro is easing speculation that the Swiss National Bank will continueto intervene to weaken its currency. Today’s action indicates that a test of1.1309 is likely over the short-run.
Stronger demand for higher risk assets is driving theCanadian Dollar higher. The strong rally in crude oil and U.S. equities helped to push theUSD CAD through the last main bottom at 1.0333, turning the main trend to downon the daily chart. Traders are also more confident that the Bank of Canadawill hike interest rates a second time now that the Reserve Bank of New Zealand hasbegun its tightening cycle.