New Zealand’s dollar may strengthen against the euro beyond the record it reached on July 16, according to JPMorgan Chase & Co.
The kiwi, as the currency is nicknamed, has traded between NZ$1.5507 and NZ$1.5324 against the euro for most of July as the 17-nation currency’s bearish momentum slowed, Niall O’Connor, a technical analyst at JPMorgan in New York, wrote today in a client note. Concern the euro bloc’s debt crisis is worsening still could push the kiwi to NZ$1.51, beating the NZ$1.5324 record it set two days ago, he said.
“The euro-kiwi still looks like it could go lower because the euro is likely to go lower,” O’Connor said in a telephone interview. “There is further downside for the cross, since it hasn’t done anything bullish yet.”
New Zealand’s currency gained 0.5 percent to NZ$1.5349 per euro today in New York. It rose 0.2 percent to 79.93 U.S. cents.
A drop by the New Zealand dollar against its American counterpart below the support range of 78.40 to 78.70 U.S. cents may confirm a “deeper corrective phase” and cause the kiwi to weaken further, according to O’Connor. The pair is forming a “head-and-shoulders” pattern on its price chart, a bearish signal, O’Connor said.
A head-and-shoulders pattern comprises three consecutive peaks on a chart, with the middle being the highest. A breach of a neckline, drawn across the base of the three peaks, is seen to indicate a trend is about to reverse.
“There’s a potential pattern developing suggesting a weaker tone developing,” O’Connor said. “If it breaks the support level, that would suggest that there is further downside.”
A support level is an area on a chart where buy orders may be clustered.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.
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