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.