Technical Sentiment: Bullish
Key Takeaways
- U.S. Existing Home Sales due Tuesday afternoon, bullish consensus for 5.11M vs. 5.05M.
- Wednesday is set to be a volatile day, with numerous high impact releases;
- U.S. Dollar shows bullish momentum building ahead of Core CPI release on Wednesday.
Better than expected GDP and Industrial Production from China increased flows into AUD and NZD in early trading hours on Tuesday. During the European session, however, the U.S. Dollar mounted a strong comeback against a basket of currencies, dragging NZD/USD down after price briefly touched a resistance cluster.
Technical Analysis
So far throughout October, NZD/USD has been grinding higher at a slow pace within a channel with a slightly bullish slope, maintaining an easily recognizable swing configuration of Higher Highs and Higher Lows. On Tuesday, during Asian trading hours, price spiked above the psychological handle of 0.8000 for a short period of time. This rally quickly exhausted and reversed once hitting 0.8034, where channel resistance kept buyers in check. On 4H timeframe, 200 Simple Moving Average descended down to 0.8007, strengthening this key resistance area.
Stochastic has finally entered overbought territory on Daily and appears to be making a bearish cross, hinting a large top could form in this area. We’re still waiting for price action to confirm this view during the U.S. session. A decline down to 0.7950 and below would suffice, since NZD/USD would close as a bearish Pin bar on Daily, potentially triggering a small-scale stop avalanche down to 0.7850 within a few trading sessions. If NZD/USD breaks this support handle as well, this channel will become a bullish flag, confirming a full-scale downtrend comeback.
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On the other hand, if NZD/USD somehow stabilizes above 0.8000, bulls will be forced to test a major pivot at 0.8050/76, with potential toward the 50-Day Simple Moving Average (currently priced at 0.8130. This scenario appears unlikely given U.S. Dollar strength we’re seeing, but price action will ultimately confirm which way NZD/USD goes.
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Prepared by Alex, Currency Strategist at Capital Trust Markets
