NZDUSD Technical ANALYSIS: NEUTRAL
- NZ Dollar back on the defensive as sellers challenge 6-week support
- Risk/reward setup might keep breakout at bay pending key event risk
- Much-anticipated FOMC interest rate policy decision looming large
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The New Zealand Dollar recoiled downward after testing resistance guiding it lower against its US counterpart since late July 2017. Prices are now testing support defining the upswing from mid-June. A daily close below that would paint the rise as corrective and argue for resumption of the longer-term decline.
In this scenario, initial support lines up in the 0.6559-91 congestion area. A further push below that sets the stage to challenge the base of the six-week rally in the 0.6482-96 zone. On the topside, a dense resistance bloc running up through 0.6727 is followed by the July 19 swing high at 0.6791.
An actionable trade setup seems to be absent at present. NZDUSD are sitting squarely top near-term support, which might dissuade a fresh crop of sellers from joining the fray on risk/reward grounds. On the other hand, making the case for a lasting move higher seems to demand at least a discernible reversal signal.
With that in mind, a period of digestion near current levels may be in the cards until an external catalyst forces a decisive breakout. The coming week is loaded with heavy duty event risk to provide just such a nudge. A much-anticipated FOMC monetary policy announcement may prove to be most decisive.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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