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NZD/USD Technical Analysis: Rare Candle Setup Hints at Topping

NZD/USD Technical Analysis: Rare Candle Setup Hints at Topping

Ilya Spivak, Head Strategist, APAC

NZD/USD Technical ANALYSIS: BEARISH

  • NZ Dollar top may be in place, marked by 3 Black Crows candle setup
  • Breaking below near-term range floor needed to secure confirmation
  • Trader sentiment studies flashing warning sign for would-be sellers

The New Zealand Dollar may be preparing to resume the downtrend against its US counterpart after the Fed’s move to make QE open-ended triggered a broad-based reversal across financial markets. The appearance of a somewhat rare bearish Three Black Crows candlestick pattern now suggests that the rise may have run its course after meeting resistance below the 0.61 figure.

New Zealand Dollar vs US Dollar - daily

NZD/USD daily chart created using TradingView

Nearer-term positioning on the four-hour chart seems to bolster sellers’ argument, showing a break of counter-trend support guiding NZD/USD higher over the past two weeks. A break below resistance-turned-support in the 0.5877-0.5918 area seems needed as confirmation to make the case for downward follow-through. Without that, a period of consolidative drift may yet precede another foray upward.

If a breach of support does materialize, downside hurdles at 0.5774 and 0.5584 line up along the way to testing the March swing bottom at 0.5466. Alternatively, a push above the 0.5981-88 price inflection zone might set the stage for a return to challenge recent swing highs just below the 0.61 figure. Establishing a foothold above that seems like a prerequisite for neutralizing current selling pressure.

New Zealand Dollar vs US Dollar - 4 hour

NZD/USD 4-hour chart created using TradingView

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NZD/USD TRADER SENTIMENT

New Zealand Dollar vs US Dollar price, trader sentiment

Retail sentiment data shows 57.44% of traders are net-short, with the short-to-long ratio at 1.35 to 1. IG Client Sentiment(IGCS) is typically used as a contrarian indicator, soretail traders being net-short suggests NZD/USD may be biased upward. Furthermore, traders are more net-short than they were yesterday and compared with a week ago, which bolsters the sentiment-derived upside tilt.

See the full IGCS sentiment report here.

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NZD/USD TRADING RESOURCES:

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

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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