NZD/USD Technicals – Bearish continuation from 0.868 vs Bullish run from 0.818

After the bearish breakout from 16th April has been invalidated, price has managed to keep itself mostly above 0.848 significant support/resistance, where the breakout started. A new rising Channel has also been formed.

Daily Chart

Currently, price is facing downward pressures in the form of the descending trendline, and upward pressure from Channel Bottom. Even though the rally from Mar lows isn’t invalidated yet, the same could be said of the decline from April highs, 2 days before the bearish breakout. In fact, price action from the past 2 weeks have only managed to post consecutive lower highs, 3 if you consider the 11th April peak. Also, current price action would find stronger support in the form of 0.848 which is the confluence with Senkou Span A (current Kumo topside). Even if price manage to stay around 0.848, can still be considered a bearish breakout from the Channel, which may add additional bearish pressure on top of what the descending trendline has been pressing on – thus increasing the likelihood of price entering the Kumo and eventually breaking 0.848.

Stochastic readings kind of agree with this outlook, however evidence is still not forthright. Readings are merely staying flat right now, which suggests that the bearish cycle that has started last week is still ongoing, but not a strong convincing sign that the bear cycle is back on track.

Hourly Chart

Short term hourly chart shows a Kumo breakout, but price is able to find interim support above 0.848. The latest period shows signs of recovery alone the Channel Bottom, but price is facing resistance in the form of Overhead Kumo, together with the red Kijuu Sen and blue Tenkan Sen. Depending on how price react along current levels, we could find early signs of whether the Channel Breakout stated above may take place, or a rebound higher above 0.85 may take root. Stochastic readings is showing mixed signs with an interim trough looking likely to form, suggesting that price may move up slightly from here. However, there is a divergence seen with current Stoch trough (if formed) being higher than the one formed yesterday, yet price is somewhere along same levels. This would suggest that any short-term bull cycle from here may be weak, which may not be too far away from the previously discussed scenario where price may rally only to find Kumo resistance, which would be further up towards 0.8515 should price push up now.

Fundamentally, things have not changed for New Zealand since the fateful RBNZ decision where Governor Wheeler mentioned that there will not be any further change in rate for 2013. We have not seen any more economic news release recently, which makes tomorrow (tonight 5:00pm EDT) RBNZ Financial Stability Report, and Kiwi Employment Data on Thursday (Wed 6:45pm EDT) all the more important to determine direction of NZD/USD which is on the verge of another leg of bearish move.

More Links:
AUD/USD – RBA Rate Cut Reaction
GBP/USD – Takes a Breather Around 1.5550
EUR/USD – Slips Back Under 1.31

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