Technical Sentiment: Bullish
Key Takeaways
Traders are disregarding that the US Dollar still maintains a bullish bias. Increased overnight risk aversion saw the NZD/USD bounce for the second time after a fake spike through the 200-Day Simple Moving Average.
Technical Analysis
If NZD/USD intends to break the losing streak and correct higher for a change, then it has probably arrived at the perfect location to do so. We can now easily identify several signs of weakness within the bearish swing, increasing the odds of a temporary price bottom followed which will be followed by a decent rally.
On Wednesday, the first attempt to cross below 0.8460 (support from last week strengthened by the 200-Day Simple Moving Average) somehow managed to end as a bullish Pin bar. This pattern was successfully activated on Thursday, yet there was zero follow through. Today’s price action is creating a déjà-vu moment: NZD/USD is likely to form a 2nd bullish Pin bar, reinstating the bullish tone. Stochastic is trying to escape oversold territory on the Daily time frame, further confirming the scenario of a temporary bottom in this area.
Free Reports:
A daily close above 0.8460 signals a strong possibility for bullish action starting early next week. This scenario requires a second confirmation: a rally above 0.8494, in order to invalidate the intraday configuration of Lower Highs. 0.8516-0.8530 is the immediate resistance target. Above this zone, bullish potential extends as high as 0.8620-0.8650 (50-Day SMA, 100-Day SMA, 50% Fibonacci retracement and previous support area).
Failure to close above 0.8460 will mean more losses are in store for NZD/USD. Below 0.8431 sellers will target 0.8400 and raise the possibility of a deeper decline toward the 0.8240 area, putting the pair in extreme bearish mode.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
