NZD/USD Technical Analysis: Double Top Forming Below 0.69?
NZD/USD Technical Strategy: 0.6785
- New Zealand Dollar bounce cut short at familiar resistance level
- RSI divergence suggests that a double top may be in in the works
- Short position remains in play absent clear bullish invalidation
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The New Zealand Dollar has returned to challenge resistance in the 0.6851-84 area after a foray to the downside was cut short below the 0.68 figure. A nominally higher high has been set but confirmation of a break on a daily closing basis is conspicuously absent (at least for now) and negative RSI divergence warns of ebbing upside momentum.
A reversal downward from here sees initial trend line support at 0.6795, with a break below making a compelling argument for downtrend resumption and opening the door for a test of the 0.6688-0.6726 zone. Alternatively, a daily close above 0.6884 eyes a minor chart inflection point barrier at 0.6965, followed by a more substantive threshold at 0.7060 (June 6 high).
The short NZD/USD trade triggered at 0.6785 remains in play. While lasting downside follow-through is yet to materialize, the bearish pattern at the heart of the setup has not been overturned. With that in mind, it seems prudent to give the position a bit of room to develop and establish clearly whether a secondary top will lead to reversal or if definitive invalidation will open the door for gains.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.