NZD/USD Technical ANALYSIS: BEARISH
- Bullish candle pattern, RSI divergence hint at NZD/USD bounce ahead
- Four-hour chart suggests corrective recovery may be underway already
- Longer-term positioning continues to argue for a broadly bearish bias
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The New Zealand Dollar may be preparing to launch a recovery against its US counterpart. Prices put in a bullish Piercing Line candlestick pattern on a test of support in the 0.6197-0.6268 area, the August – September 2015 bottom. Positive RSI divergence bolsters the case for the upside scenario.
The first upside hurdle is marked by support-turned-resistance at 0.6328, the 23.6% Fibonacci expansion. Establishing a foothold back above that on a daily closing basis opens the door for a retest of the 0.6425-0.6441 zone, the October 2018 bottom.
Daily NZD/USD chart created using TradingView
Sizing up more immediate positioning on the four-hour chart, it looks like a bounce is already underway. Prices have broken above resistance guiding them lower from the September 12 swing top, implying a change of near-term bias. Minor upside barriers line up at 0.6298, 0.6320 and 0.6359 from here.
4-hour NZD/USD chart created using TradingView
Nevertheless, the monthly chart continues to paint a broadly bearish picture. Prices finished August with a breach of 19-year uptrend support, implying a lasting pivot in favor of the downside. Invalidating the case for structural weakness probably needs a convicting break above the 0.6829-0.6917 region.
Monthly NZD/USD chart created using TradingView
On balance, suggests that any upside progress in the near term might be corrective within a broader downshift. Pre-positioning for the upcoming RBNZ rate decision may well be in play. Prices finished last week at a four-year low, which might have seemed over-extended ahead of punchy event risk.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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