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NZD/USD Technical Analysis: Ready to Make Good on Topping Setup?

NZD/USD Technical Analysis: Ready to Make Good on Topping Setup?

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar may be ready to make good on Head and Shoulders top pattern
  • Confirmation, improved risk/reward parameters sought to enter short position

The New Zealand Dollar may be starting to make good on a bearish Head and Shoulders chart having initially struggled to find directional follow-through. Last week, prices broke the pattern’s neckline to hint at a major reversal in progress but stalled and attempted an upside retest before sellers returned in force.

From here, a daily close below the 50% Fibonacci retracement at 0.7188 paves the way for a challenge of the 61.8% level at 0.7101. Alternatively, a push back above neckline support-turned-resistance, now at 0.7256, opens the door for a test of the 0.7299-0.7337 area (August 21 and 29 highs).

The H&S setup implies a measured downside objective just above the 0.69 figure. Entering a short position on this basis seems premature from a risk/reward perspective absent a daily close below immediate support however. Opting for the sidelines seems most attractive in the interim.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.