Trade Outlook- 21 August 2023 


Technical Analysis 

From the 4-hour perspective, NZDUSD still trading below the major level 0.60000 without any technical rebound sign. This suggests that the market could continue to move lower. 

The 10-EMA and 20-EMA have also crossed bearish, which further confirms the downtrend. Additionally, the MACD is currently below the zero line, which is another bearish sign. 

Based on these technical factors, I expect NZDUSD to continue to move lower in the next trading session. 

Fundamental Analysis 

From a fundamental perspective, as RBNZ maintain the cash rate at 5.50% without any hawkish statement, and the slow down in China’s economy could give the negative impact on NZD. At the same time, both JP Morgan and Goldman Sachs share a bearish view on NZDUSD in their research papers. They forecast the NZDUSD to be around 0.57000 and 0.55000 respectively over the next 3 months.  

Other supporting data: 

DXM Analysis

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Description automatically generated
The DXM, or Dump Money Index, is a measure of the number of retail traders who are long or short a particular currency pair. A high DXM reading indicates that there are a lot of retail traders who are long the pair, while a low DXM reading indicates that there are a lot of retail traders who are short the pair. In the case of NZDUSD, the DXM is currently at 84%, which means that 84% of retail traders are long the pair. This is a bearish signal, as it suggests that the market is likely to move lower. 

The reason why this is a bearish signal is because 95% of retail traders lose money in the long term. This means that the majority of the people who are long NZDUSD are likely to lose money on their trades. 

Seasonality Analysis 

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Description automatically generatedSeasonality analysis is a method of predicting future price movements based on historical data. In the case of NZDUSD, the seasonality analysis suggests that the pair is likely to maintain a bearish trend in the next 40 days. 

This is in line with our bearish view from the fundamental analysis and the technical analysis. However, it is important to keep in mind that seasonality analysis is just a pattern and does not take into account the latest news or developments. As such, it is important to use it in conjunction with other factors when making trading decisions. 

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