Technical Analysis – NZDUSD deteriorates below MAs; correction tests 38.2% Fibonacci


Anthony Charalambous, XM Investment Research Desk

NZDUSD bounced on the upper band of the key support section of 0.7134-0.7156, only to plunge towards the 0.7139 obstacle. This encapsulated level happens to be the 38.2% Fibonacci retracement of the up leg from 0.6612 to the multi-year high of 0.7464. The falling Ichimoku lines suggest negative price action is increasing, while the bullish demeanour of the SMAs is clearly waning, mainly reflected in the diving 50-period SMA.

The short-term oscillators are also signalling a pickup in negative sentiment. The MACD, in the bearish region, is dipping further below its red trigger line, while the falling RSI has dived below the 30 level. The stochastic lines remain submerged in oversold territory, and the %K line has yet to show any signs of a pickup in positive momentum, thus promoting further retracement in the price.

If sellers manage to steer the price decisively beneath the lower boundary of 0.7134 of the current limiting zone of 0.7134-0.7156, the pair could encounter next support at the neighbouring section of 0.7082-0.7105. Should the price snowball past this too, the bears may then target the 50.0% Fibo of 0.7039 and the adjacent trough of 0.7029, keeping their eyes on the 0.7000 handle.

Otherwise, if the 0.7134-0.7156 base defends the broader positive structure and the price returns above 0.7156, first resistance could come at the 0.7179 obstacle. Climbing from here, buyers may battle the 0.7200-0.7208 resistance band, before having to deal with the 200-period SMA overhead at 0.7229. Successfully recouping its latest downfall, the pair may then face a profound area of resistance from 0.7257-0.7280, reinforced by the encompassed 100-period SMA at 0.7268.

Summarizing, for confidence in the bullish picture to be reinforced, the price would need to shift above 0.7300-0.7314, while a break beneath 0.7134 could be pivotal to boost a deeper retracement in the pair.