The New Zealand dollar is the top performer today, can it last?

New Zealand consumer confidence fell 2.8% in a report earlier today but you wouldn't know it from the currency scorecard. The kiwi is up 56 pips today to 0.7139 in its largest one-day gain in three weeks.

The kiwi has been getting beaten up over the last month on election and political worries. Negotiations are continuing and there is no near-term expectations of a resolution.

That's the first reason why today's bounce is so suspect. The second is the chart.

This looks like a textbook head-and-shoulders pattern that broke down on the initial fall below 0.7130.

We're in the 'seller's remorse' phase here now and are getting a retest of the Aug 31 low and the 200-day moving average. If those levels hold in the day ahead, watch out for a renewed round of selling and slow fall down to the May lows.

We wait for a retest of 200 SMA and the horizontal resistance, then move to a 4-hour chart and wait for a Price Action signal. After that, we go short with SL of 0.2755.

Alternative scenario: If the price closes the bar on the Daily chart above the 200 SMA, we may see a test of the horizontal levels at 0.7220. Breakaway there will move the price up to the diagonal resistance of the downtrend around 0.7344

Jr Trader Alexander Kumanov

Read more:

• NZD/JPY – Short with the main movement after a price action signal
• Jeffrey Gundlach: “USD’s next move is going to be down”
• Here’s a cable forecast for $1.40 till end of 2020
• NZD to 0.59 at end of Q1 2020
• Support for risky currencies as trade war hopes grow