NZD/USD Fails To Hold Above Key Horizontal Level

NZD/USD fell under pressure today to give back about 40% of Friday’s gains. The pair has fallen back below an important horizontal level and remains confined within a declining trend channel that dates back to a high posted at the end of July.

A horizontal level at 0.7311 is significant on a weekly chart and acted as resistance on several attempts since mid-2016. The pair managed to break above it on Friday to hold the level on a weekly basis but is seen declining below it today.

The upper line of a trend channel held NZD/USD lower on Friday’s rally and a move towards the channel resistance today was met with sellers. While below channel resistance, the pair continues to signal that a correction is taking place.

Somewhat of a divergence is taking place between the antipodean currencies as a similar technical setup is seen in AUD/USD and a bullish breach materialized on the rally that followed Friday’s US CPI data.

Rather than a declining trend channel, a declining trendline had held the pair lower. Similar to NZD/USD, the trendline originates from a high posted on the last day of July. The pair dropped lower today and was last seen retesting the trendline although there has been little buying as of yet.

NZD/USD has been held within a range since the European open. A downside break below 0.7280 would signal a bearish continuation. A sustained break above the 0.7300 handle would lead to an upside channel break which signals a reversal of trend.

Downside targets for the pair fall at the December 2016 high of 0.7238 followed by prior support seen on a 4-hour chart at 0.7185.

NZD/USD 4-Hour Chart

NZDUSD 4H Aug 14

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.