The New Zealand dollar’s 50-day moving average fell below the 100-day moving average last month and has stayed under it, forming a so-called death cross that signals a risk of increasing weakness, according to Australia & New Zealand Banking Group Ltd.
The so-called kiwi may fall toward 73.35 U.S. cents which is the 38.2 percent retracement from the high on Aug. 1 to the low of March 2009 on a Fibonacci chart, said Tim Riddell, head of global markets research at ANZ Bank in Singapore.
“The fact that the 50- and 100-day moving averages are now well above current price actions and are rolling over underlines market bias is to the downside,” Riddell said. If the New Zealand dollar’s decline “were to accelerate through the 75.50 level, it would imply not just testing the 74.70 low of early October, but would also imply we would get a move to test that retracement level of 73.35,” he said.
The kiwi currency’s failure to reach the 50-day moving average level in rallies on Nov. 7 and Nov. 14 “also underlines the near-term downside risk,” Riddell said.
The South Pacific nation’s currency tumbled to 77.32 U.S. cents on Nov. 10, the lowest since Oct. 10. It’s dropped 3.9 percent this month and was at 77.51 U.S. cents as of 2:44 p.m. Sydney time.
A death cross occurs when a short-term moving average falls below a longer-term one. The longer-term average may then become a resistance level, where sell orders may be clustered. Fibonacci analysis is based on the theory that prices tend to drop or rise by certain percentages after reaching a high or low.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.