NZD/USD Technical Analysis: Trend-Defining Resistance Under Fire

NZD/USD Technical ANALYSIS: BEARISH

• New Zealand Dollar narrowly breaks April swing top, eyes trend resistance
• Break toward 0.63 figure sets the stage for a rise toward three-year trend top
• Trader sentiment studies may be telegraphing that a reversal lower is ahead

The New Zealand Dollar narrowly closed above the April 14 swing high at 0.6131, suggesting further gains against its US counterpart may be ahead. Clearing the way for lasting follow-through faces another major hurdle in the 0.6197-0.6245 zone however. This is marked by support-turned-resistance set from the second half of 2015 and reinforced by a falling trend line defining the 2020 downtrend.

A decisive break above this barrier with confirmation on a daily close above 0.6245 appears to face a dense block of back-to-back resistance levels thereafter. The cluster begins at 0.6379 and run up into the downward-sloping trend top guiding the structural NZD/USD decline since mid-2017. Its outer layer is now positioned just above the 0.66 figure.

Immediate support appears to be found at the bottom of a rising channel enveloping price action since late March. A reversal lower that results in a daily close below this threshold – now at 0.5938 – may set the stage for a move below the 0.57 figure to nudge the March 19 close at 0.5670. If this too is overcome, a test of the swing bottom at 0.5470 seems likely to follow.

NZD/USD daily chart created using TradingView

NZD/USD TRADER SENTIMENT

Retail sentiment data shows 60.19% of traders are net-long, with the long-to-short ratio at 1.51 to 1. IG Client Sentiment (IGCS) is typically used as a contrarian indicator, so this positioning tilt suggests that NZD/USD is aiming lower. Furthermore, the net-long skew has grown compared with yesterday and last week. This seemingly makes for a stronger NZD/USD-bearish bias.

See the full IGCS sentiment report here.

NZD/USD TRADING RESOURCES:

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

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