NZDUSD Forex Trend Channel Holding

NZDUSD Forex Trend Channel Holding

NZDUSD Forex Trend Channel Holding

NZDUSD seems to be starting a rising forex trend on its short-term time frames, as the pair is creating an ascending forex trend channel on its 1-hour chart. The short-term moving average has just crossed above the long-term moving average, suggesting that an uptrend is underway.

Stochastic is still pointing up, which means that there’s enough upside momentum for the pair. Price appears to have found support at the middle of the ascending channel and the moving averages and might be headed back towards the top near the .7550 minor psychological level.

Forex Trend Reversal

On the other hand, if stochastic turns down from the overbought region and indicates a pickup in selling pressure, the pair might head back towards the bottom of the channel at the .7350 minor psychological support.

A downside break from the bottom of the forex trend channel might indicate that the short-term rally is already over and that price could resume its longer-term selloff. On the other hand, an upside break past channel resistance could mean extended gains for NZDUSD.

The path of least resistance is to the downside for now, as the FOMC recently dropped its “patient” wording and indicated that they are moving closer to hiking interest rates this year. Meanwhile, data from New Zealand wasn’t so impressive, as the latest GDT dairy auction indicated an 8.8% fall in dairy prices.

Risk aversion could continue to keep gains in check, especially as traders start pricing in the prospect of Fed tightening in June or September. However, more cautious remarks from Fed officials this week and the next could still keep the dollar weak, as traders could push back rate hike expectations further.

On its longer-term charts, NZDUSD has formed a double bottom pattern, indicating that a reversal from the recent descending forex trend might take place. Price has yet to break past the neckline resistance before confirming the potential long-term gains.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.