Buyers are wary; NZD/USD consolidates above support

Technical Sentiment: Neutral

Key Takeaways

• NZD/USD consolidates above the 0.8630 support;
• Daily trend remains bullish, towards 0.8845, as the higher lows configuration is intact;
• Below  0.8630, bearish pressure abruptly increases towards 0.8514-0.8550

Analyzing the configuration and direction of the swing highs and lows, in direct correlation with the main S/R levels and the major Simple Moving Averages (50, 100 and 200) , can provide an accurate story of the chart. Weaknesses in the trend can be identified early, along with key levels where traders ditch or reverse their positions.

NZD/USD reached a fresh multi-year high last week, at 0.8745, 100 pips shy of 0.8842, 2011 high. While US data continues to beat expectations,  Core Retail Sales at 0.7%, 0.2% higher than the forecast, and Retail Sales up 1.1% vs 0.8% forecast; reactions are muted as traders are waiting for Yellen’s Speech and of course tomorrow’s Speeches from FOMC Members Plosser and Kocherlakota.
The US Dollar inaugurated this week vigorously, prompting NZD/USD to test an intermediary support for the second time. Traders who are trailing this pair higher should pay close attention to possible exhausting signs.

Daily View

The 4h and Daily uptrend configuration is intact, as the pair is always keeping up with it’s higher swing lows and higher highs. Daily RSI is showing a small negative divergence; albeit it doesn’t amount to much while the most recent lows at 0.8623 remains intact.

Intraday Consolidation Signs

The 1H chart shows strong consolidation between 0.8630 and 0.8700. The pair has bounced for the second from off the 200 Simple Moving Average, 50.00% Fibonacci Retracement level and March’s pivot zone. It should be noted that only above 0.8700, above the short term lower high, the main uptrend will fully resume and consequently target 0.8745, then 0.8800-0.8841 area.

Failure to cross above 0.8700 will leave price in a short term triangle formation, which will most likely be broken out of tomorrow. If the lower high remains intact and NZD/USD falls below 0.8630, then we will see a larger correction towards 0.8545, the 200 SMA on 4H chart, and 0.8514, the main price pivot zone from March-April.

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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets