NZDUSD had been consolidating inside a descending triangle pattern, forming lower highs and finding support at .6575. Price recently made a move past the triangle resistance, which suggests that further gains are in the cards.
The triangle formation is around 200 pips tall so the resulting climb could last by the same amount, taking NZDUSD up to the .6800 levels. However, technical indicators are hinting that declines might still be possible.
The 100 SMA is below the 200 SMA so the path of least resistance might be to the downside. In addition, stochastic is already indicating overbought conditions while RSI is also approaching those levels. A return in selling pressure could trigger a pullback to the broken triangle resistance or a move back inside the formation.
If the broken triangle resistance holds as support, NZDUSD could still resume its climb to the .6800 area or at least the triangle highs near .6750. On the other hand, a drop back inside the formation could show that the upside break was a false one and that sellers are still strong.
Risk-on flows are currently supporting commodity currencies as investors continue to hope that a deal among OPEC and non-OPEC nations could be struck to cap production and boost oil prices. Although Iran has confirmed that it was able to increase its output by 500,000 barrels per day, the drop in oil rigs in the US suggests some downside pressure on supply.
Event risks include the release of US flash manufacturing PMI data today, although a small dip is eyed. Weaker than expected results could mean more USD losses and further upside for NZDUSD.
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