After a ‘rampant’ rally since early October the Bloomberg NZD Index looks ready to enter a corrective phase, says Sejul Gokal, Chief Technical Strategist at GO-TechniKAL Insight.
Gokal says the Index has reached a strong area of resistance, which comes from the trendline down from early 2017 (see Chart 1). He also points to a very clear 1-2-3-4-5 Elliott Wave count, which suggests the Index is now likely to enter an A-B-C corrective phase (see Chart 2). Momentum studies provide further evidence for this view, with a recent negative divergence hinting the upside looks exhausted (lower pane, Chart 2).
In USD terms, Gokal says a confirmed close below 0.6850 would bring targets of 0.6805 and then 0.6754 into sight for Kiwi-Dollar. A return above 0.6912 would, however, bring this outlook into question.