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Kiwi turns bullish on moderate economic expansion

new zealand moneyThe Brexit issue has considerably increased the anxiety among investors across the world. Thus, most traders have decreased their exposure in the Euro dollar and the Pound.

On the other hand, currencies such as the New Zealand dollar, which are less affected by the Brexit issue, are being monitored for trading opportunities. Having lost nearly 1000 pips in the past one month, the EUR/NZD currency pair does not show any signs of reversal because of the factors mentioned above. The EUR/NZD currency pair, which closed at 1.5985 on Friday, offers yet another opportunity to go short due to the reasons given below.

Until the referendum gets over and a firm assessment of the situation is done, investors will continue to stay away from the Euro. Yesterday, the Britain’s tabloid ‘Mail’ offered its support for the ‘remain’ campaign. On the other hand, the ‘Sunday Times’ asked its readers to vote in favour of an exit from the European Union. Such a scenario will further discourage investments in the Euro.

Money And Markets

As far as New Zealand is concerned, the economic data announced last week was encouraging. The country recorded a GDP growth rate of 0.7% on a q-o- q basis. It was slightly lower than the expansion rate of 0.9% reported in the fourth-quarter of fiscal 2015, but higher than the analysts’ estimates of 0.5%. The construction industry boom mainly contributed to the growth of the GDP. The Reserve Bank of New Zealand now expects an annual growth rate of 3% for the next two years.

Similarly, the ANZ-Roy Morgan consumer survey indicated that net 10% consumers in the New Zealand felt that their financial situation is considerably better than a year ago. The index rose 2.3% to 118.9 in June, from 116.2 a month earlier. A reading above 100 indicates that there is optimism among the consumers and vice-versa. Thus, we can anticipate the Euro to weaken and the New Zealand dollar to strengthen further in the coming days. This means that the EUR/NZD pair will decline further.

The chart indicates clearly that the EUR/NZD currency pair is confined within the declining channel. The RSI reading of about 40 indicates bearishness in the currency pair. Minor resistance for the currency pair is at 1.6150, while the support zone exists between 1.5420 and 1.5620.

EUR/NZD Pair: June 20th 2016

EUR/NZD Pair: June 20th 2016

Thus, a Forex trader should take a short position near 1.600. To protect from unexpected increases in volatility, a stop loss order should be placed at 1.6290. The take profit order should be placed at 1.5620.

By purchasing a one touch put option from a reliable broker, a binary trader can benefit from the probable decline of the EUR/NZD pair. The strike price for the trade should be 1.5700 or higher. The trade would benefit if the contract expires in the third week of July.

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