Sentiment Speaks - Signal In Place That The Kiwi Dollar's Big Move Is Underway

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Includes: ENZL
by: Michael Golembesky

Summary

Price action over the prior month.

Anecdotal and other sentiment indications.

Price pattern sentiment indications and upcoming expectations.

Price Action Over Prior Month

In May of this year, I wrote that the NZD/USD was setting up to see a big move. In article, I had noted that we had completed a larger degree pattern to the downside and had seen the initial indications of a strength signaling that the pair may be forming a larger degree bottom soon. I had also noted that I would want to see a full 5-wave impulsive move to the upside to give us the next level of confirmation that a bottom may be in place. I had set ideal targets for this initial move up into the 0.7093-0.7144 zone. I can now count a full 5-wave impulsive move up off of that 0.6817 low and currently, the pair is trading at the 0.7274 level having exceeded the targets that I had noted on May 25th.

Anecdotal and Other Sentiment Indications

There still are really not much in the way of major data announcements coming out of New Zealand over the past several weeks nor are they are any major announcements scheduled in the next several weeks ahead. We did have the Federal Reserve Rate hike occur on June 14th which did mark a local top for the pair but the pair has traded back over that level once again in late June and once again on July 2nd.

After being at their lowest levels since July of 2015 the open interest for non-commercial traders based on the COT data is now back at it’s lowest levels since April of 2013. This may be giving us an additional evidence that the pair is getting extended at current levels and we may be forming a local top on the pair.

Price Pattern Sentiment Indications and Upcoming Expectations

As noted above I can now consider the move up off of the 0.6817 low as having enough waves in place to consider full 5-wave pattern completed Additionally we are now getting quite extended from a Fibonacci extension point of view. Now further extensions to the upside are certainly not out of the question I would ideally prefer to see a corrective retrace lower into the 0.7142-0.7018 zone prior to moving higher once again. With that being said, I do want to note that while the 0.7142 - 0.7018 is the ideal support zone to this pattern the larger degree setup itself does not invalidate until and unless the pair were to break back under the 0.6817 level.

While seeing a full 5 wave move up into current levels was the previous signal that I was looking for to signal that the larger degree move to the upside was underway, I now am looking for a corrective 3 wave retrace that ideally holds the 61.8 retrace level at 0.7018 to give us the next signal that we have indeed formed a large degree bottom. If we can hold that level and then follow that up with another break of the current highs then we could very well be on our way up to the larger degree target zone over the 0.8000 levels providing an excellent setup to catch a very large move over the course of the next several years.

NZDUSD Daily NZDUSD 4 Hour NZDUSD COT DATA

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.