NZDUSD is showing signs of a forex correction on its short-term time frames, as price bounced off the .7550 minor psychological support and is retreating to the Fibonacci levels on the latest swing high and low. In particular, the 50% Fibonacci level is close to the broken support at the .7650 minor psychological level, which might hold as resistance.
Stochastic on the 1-hour chart is still moving up, indicating that price is about to head further north. In addition, the pair is testing the resistance at the longer-term exponential moving average, which is near the 38.2% Fibonacci retracement level. The short-term EMA has recently crossed below the long-term EMA, suggesting that the downtrend could carry on after the forex correction.
Forex Correction Levels
If so, NZDUSD could move back to its previous lows at .7550 or even create new ones. This could depend on the outcome of the top-tier events scheduled from both the U.S. and New Zealand this week.
Only the flash services PMI is due from the US today while New Zealand has an empty economic schedule. Price action could show more volatility tomorrow, with the US consumer confidence index due. Stronger than expected data could lend support for the dollar and allow the selloff to resume.
On Wednesday, New Zealand will release its trade balance and ANZ business confidence index, which might also provide volatility for NZDUSD. Improvements are expected and these might be enough reason for the pair to break past the forex correction levels and test the next ceiling around the .7750 area.
However, the FOMC statement might have a bigger say in determining the longer-term direction of this pair, with a hawkish statement likely to renew dollar gains. On the other hand, a downbeat FOMC announcement could lead to a prolonged dollar selloff, which would mean a longer-term rally for NZDUSD.
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