NZD/USD Technical Analysis: Downturn Brewing at Trend Top?
NZD/USD Technical ANALYSIS: BEARISH
- NZ Dollar may turn lower after showing Shooting Star candle at resistance
- Four-hour chart reveals bearish Head and Shoulders patter, RSI divergence
- Bearish scenario needs confirmation on a break of near-term trend support
The New Zealand Dollar has stalled after hitting resistance guiding it lower against its US counterpart since July 2017. The appearance of a dramatic-looking Shooting Star candlestick speaks to ebbing bullish conviction, which may precede a downturn.
Back-to-back support levels are clustered in the 0.6425-96 area. A daily close below its lower bound would breach the series of higher lows set from October’s swing bottom, neutralizing near-term upside pressure and setting the stage for resumption of the longer-term decline.
Zooming in to the four-hour chart for a sense of more immediate positioning reveals what might be the makings of a Head and Shoulders (H&S) topping pattern. Negative RSI divergence speaks to diminished upward momentum, bolstering the case for a downside scenario.
Nevertheless, confirmation on a break of upward-sloping trend support is still pending. Absent that, the current setup might be seen as unattractive on risk/reward grounds by would-be sellers as NZD/USD hovers squarely at near-term support (0.6576). A test of swing low support at 0.6518 may follow if it is broken.
4-hour NZD/USD chart created using TradingView
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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.