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The New Zealand broke above resistance at the April 2013 high to hit the highest level in nearly three years against its US counterpart. Buyers now aim to challenge the 38.2% Fibonacci expansion at 0.8762, with a breach above that aiming for the 50% level at 0.8839. Alternatively, a turn back below the 0.8667-75 area, marked by the April’13 high and the 23.6% Fib, exposes the October’13 top at 0.8513.
While the technical break looks compelling as a buying opportunity, negative RSI divergence warns of ebbing upside momentum and hints a turn lower may be around the corner. With that in mind, we will tactically opt not to enter long and remain on the sidelines.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com