NZD/USD has been consolidating consolidating as we can see in the 4H chart, between roughly 0.74 and 0.77. Note the price action swinging above and below the cluster of 200-, 100-, and 50-period simple moving averages, which are moving essentially sideways. Teh RSI has been swinging above 70 and below 30, showing a lack of directional momentum.
This week price action was bullish, holding above 0.74 and rallying to 0.77 by the 4/16 session. We are seeing some initial resistance, and price action suggests at least a near-term pullback down towards the 0.76 area.
If price falls back and holds above 0.7550, and the 4H RSI holds above 40, the bullish momentum and thus outlook from this week would remain in play going into the next week. However ,a break below 0.7550 should put pressure back at the 0.7390-0.74 area.
There is actually a larger consolidation than we are seeing in the 4H chart. When we look at the daily chart, we can see one that started in the beginning of February, when NZD/USd made a low on the year 0.7176. Price action in March came close to breaking this low, but instead started to form a double bottom.
When price cleared 0.76, the double bottom was complete, but NZD/USD failed to extend above 0.77. This means the market was still tentative about forming a price bottom for a bullish correction. The USD was still strong. This week however, we saw the market sell the USD consistently and sharply.
With fundamentals no longer support further USD gains, the market might extend NZD/USD’s consolidation towards the 0.7890 area, a common high in a previous consolidation range.
For now let’s keep the bullish outlook limited at most to the 0.8040 high from Oct. 2014. This was the high after, which price action became choppy, albiet still bearish. So, a break above this level could reflect a major shift, but before jumping the gun, let’s first respect this resistance as the maximum target for a bullish correction.
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