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NZD/USD: Head and Shoulders Top?
by S. Wade Hansen The Reserve Bank of New Zealand (RBNZ) announced today that it is lowering interest rates from 8.25% to 8.00%. This announcement sent the NZD/USD dow to its lowest levels since the beginning of the year. Many traders and analysts expect that this interest-rate cut is just the first of many from the RBNZ to try to stimulate a slumping New Zealand economy. If the RBNZ does indeed continue to cut interest rates throughout this year and into 2009, it will most definitely have a bearish effect on the value of the New Zealand dollar (NZD). In conjunction with this bearish fundamental outlook for the NZD, as I look at the weekly chart of the NZD/USD, it appears that a longer-term head-and-shoulders top pattern may be forming. [IMG]http://www.pfxglobal.com/images/stories/nzd_head-and-shoulders.png[/IMG] If the NZD/USD can break down through the neckline at 0.7400, it could be the start of a bearish move that could take the currency pair down to 0.6900 or lower. This is just a preliminary look at what might happen to the NZD/USD if the RBNZ continues to cut interest rates. We may see a bounce back up and off of the neckline at 0.7400 before we see a serious attempt to break down and through this level, but it is certainly something to watch. Let me know what you think about the NZD/USD's chances here. I'd love to hear the feedback. What do you see fundamentally or technically that would support or contradict this analysis?
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