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.

Daily NZD/USD chart created using TradingView

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

NZD/USD TRADING RESOURCES:

• Just getting started? See our beginners’ guide for FX traders
• Having trouble with your strategy? Here’s the #1 mistake that traders make
• Join a free live webinar and have your trading questions answered

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the Comments section below or @IlyaSpivak on Twitter