NZDUSD extends strong declines, but watch for a rebound
The New Zealand dollar is hit by weak sentiment, both on account of a stronger US dollar, dovish RBNZ meeting last week and the earthquake over the weekend. The NZDUSD, which closed 3.2% lower last week has continued to trend lower earlier on Monday, but the intraday charts points to a near term rebound in prices, which could also potentially trigger a short squeeze adding to the short term, counter trend upside momentum.
Earlier today, the REINZ housing data showed that the loan to value ratio of lending restrictions implemented by the RBNZ was having its impact.
The RBNZ and the New Zealand housing authorities have been clamping down on foreign investors to cool the real estate markets driven by cheaper lending. The REINZ data showed house sales were down slightly in October but signaled that the efforts to cool the housing markets was having an impact.
The economic calendar is quiet today across the board and it is likely that the NZD will be susceptible to technical trading for the most part. With the strong declines from last week, the risk of an upside bounce increases, above 0.7100 where the kiwi could be seen targeting the old broken support of 0.7190 - 0.7180 where resistance can be established.
How to trade binary
NZDUSD closed last week with an outside bar and a bearish engulfing candlestick pattern, which signals further downside in the currency pair. However, on the 4-hour chart, we can see that price has formed a doji which comes after nearly five straight 4-hour sessions.
In today's binary options trade idea, it is ideal to buy CALL options in NZDUSD at a strike price of 0.7100. Of course, NZDUSD needs to close above this level in order for the trade to be validated, for a 21:00 GMT expiry time.
Look for price action in the next 2-hours in NZDUSD to close above 0.7100 for the CALL option to be validated.