Bloomberg News

N.Z. Dollar May Fall on ‘Black Candlestick’: Technical Analysis

September 29, 2011

Sept. 30 (Bloomberg) -- New Zealand’s dollar may fall to a six-month low versus the U.S. currency as a “long black candlestick” on its weekly chart signals further declines, according to Gaitame.com Research Institute Ltd.

The so-called kiwi lost 6.3 percent last week, the biggest five-day slide since January 2009, forming a so-called black bar on its candlestick graph, which tracks the distance between a currency’s opening and closing prices over a given period. Bars are black when the currency’s closing price is lower than the opening level and are white when the ending rate is higher.

The kiwi has fallen 1 percent since the beginning of this week and traded at 76.87 U.S. cents as of 9:33 a.m. in Sydney. The currency dropped to as low as 71.18 cents in March.

“Given that the kiwi hasn’t recovered from last week’s long black candlestick, the weak trend is likely to continue,” said Takuya Kawabata, a researcher in Tokyo at the unit of Japan’s largest currency margin company. “We have to keep the possibility in our sight it will fall to the March 17 low.”

Before that level is touched, New Zealand’s dollar has at least two support lines, Kawabata said. The first is 76.38 cents marked on Sept. 26. The second is 73.35 cents, which is a 38.2 percent retracement on the weekly Fibonacci chart from a March 2009 low to a high of August this year, he said.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level. Support refers to an area where buy orders may cluster. Resistance is where there may be orders to sell.

In technical analysis, investors study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

--Editors: Nate Hosoda, Rocky Swift

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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