Kiwi Rallies But Reversal Remains Unconfirmed
Technical Sentiment: Bearish
Key Takeaways
- The U.S. Dollar fell on Friday, 7th November, allowing most counterparts to catch their breath;
- Bullish price action signals are showing up for NZD/USD;
- A larger bullish correction remains unconfirmed as Lower Highs configuration persists;
Don’t fall for rumors that a major USD correction is coming. Before all else, wait for technical confirmations around the main resistance areas.
Technical Analysis
NZD/USD traded near the edge for all of last week, at a huge technical crossroad, 0.7660/80 support area from June 2013 to be more precise. Post NFP, when all the news was digested, greenback bulls eventually caved based on worse-than-expected U.S. data. This allowed the Kiwi to rally and close the day with a large bullish engulfing bar, signaling a potential recovery for this week.
Friday’s bullish reaction saw a modest continuation in Asian trading and during the first half of the European session on Monday. Traders pushed NZD/USD up to 0.7793, where the bullish rally ended based on insufficient economical triggers to push higher. From a swing configuration perspective NZD/USD downtrend remains intact, with Lower Highs and Lower Lows.
While everyone believes the USD gains have overextended in recent weeks, traders should refrain from targeting higher levels for now. A huge resistance confluence lies around 0.7841, marked by previous Lower High, 100 and 200 Simple Moving averages on 4H. Unless the pair can rally above this levels and completely turn bullish (with targets at 0.7975 and 0.8050) NZD/USD will remain at risk for further losses in the near future.
