Technical Sentiment: Bearish
Key Takeaways
The downtrend appears ready to resume its course, helped by strong U.S. Data, after price corrected higher just enough to reject off the old support area at 0.8400. A fresh Lower Low is expected in the coming days or as early as next week.
Technical Analysis
Price action throughout August showed constant selling interest, albeit at a slower pace than what we have witnessed in July. Fortunately, slower bearish waves coupled with limited corrective rallies depict a precise structure of Lower Highs and Lower Lows, making it easier for traders to identify critical reversal points. In the last two days, NZD/USD corrected higher after hitting a low point at 0.8310, aiming to re-test the psychological handle 0.8400 cracked in the previous week.
NZD/USD is trading around 0.8375 at the beginning of the U.S. session, with price action on the 4H time frame showing a Bearish Engulfing Bar rejecting off the resistance line at 0.84. Stochastic is declining from overbought conditions, indicating a top is likely to form in this area. We see this area as an excellent location for traders to begin accumulating short positions while hiding their stop losses above 0.8410 or above the most recent Lower High at 0.8431. If NZD/USD rallies above these levels, a deeper correction towards 0.8516/30 can be expected as a result.
Free Reports:
There is plenty of downside potential from the current levels. 0.8300 is the first level to be targeted, with clear intentions for a fresh Lower Low if the downtrend configuration is to be respected. 0.8200 is a price pivot zone dating back to October 2013, which could be the secondary target within a couple of weeks.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
