NZDUSD resumed its impulse wave towards the end of the previous year after finding resistance at the top of the falling channel on its 4-hour time frame. Price could be headed for support around the .7550 to .7600 support area as it just broke below the mid-channel area of interest.
Bear in mind that stochastic is giving the oversold signal, which suggests that buying pressure could return in the short-term. In that case, a pullback to the .7700 area of interest and former support could be possible before the drop resumes. If sellers remain strong, price could keep up the momentum towards the bottom.
NZDUSD Forex Selloff
If you’re bearish on this pair, you could still hop in the drop and catch the move until the .7550 support or lower. The path of least resistance for NZDUSD is to the downside as fundamentals remain weak, especially if this week’s dairy auction shows another decline in prices.
Apart from that, the decline in oil prices is also weighing on the commodity currency, which is heavily dependent on exports. Just last week, the downturn in Chinese manufacturing also weighed on the Kiwi. Meanwhile, the US dollar is drawing strong support from the upgrade in Q3 GDP and the prospect of Fed tightening this year.
There are no event risks for both the US and New Zealand for today, leaving risk sentiment as the main driver of forex price action for NZDUSD. It appears that risk aversion is in play for the time being, thanks to the political conflict in Greece and projections of further declines in oil prices.
However, if risk appetite picks up, NZDUSD could climb back to the top of the range and retest the resistance around .7900. An upside break past the .8000 area could signify the start of a forex reversal and more longer-term gains for the pair.
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