The New Zealand Dollar (NZD) against the US Dollar (USD) has recently witnessed a shift in its trajectory, with the pair showing a decline after reaching a new 3-month high of 0.6085. This change comes after a notable rally from the November 1 low of 0.6017. The NZDUSD pair's movement can largely be attributed to the recent underperformance of the USD, which provided an opportunity for NZD bulls to create a bullish pattern of higher highs and lows. However, for this bullish pattern to remain valid, the pair must not fall below the 0.5939 level.
The formation of a potential double top pattern, with the neckline at 0.5772, suggests a bearish reversal could be in the offing. Technical indicators present a mixed view: the Average Directional Movement Index (ADX) indicates a lack of a clear trend, while the Relative Strength Index (RSI) is decreasing but remains above the midpoint of 50.
The stochastic oscillator, nearing a break below its moving average, is a key indicator to watch, as it might signal the onset of a correction in NZDUSD.
Bullish Scenarios and Resistance Levels
hould the bulls maintain their momentum, their immediate goal would be to push NZDUSD above the 0.6060-0.6092 resistance area. This zone is significant due to its confluence of the 38.2% Fibonacci retracement of the April to October 2022 downtrend, the July 14, 2022, low, and the 200-day Simple Moving Average (SMA). Surpassing this could clear the way to the October 1, 2019, low at 0.6198.
Bearish Outlook and Support Levels
Conversely, if the bears regain control, their initial target would be to keep NZDUSD below the aforementioned resistance area, followed by a move towards the 100-day SMA at 0.5991. Further bearish momentum could bring the pair into the 0.5920-0.5923 support range, marked by the May 15, 2022, low and the 50-day SMA. Substantial support could also be encountered at the 0.5870 and 0.5813 levels.
A Balance of Bullish and Bearish Forces
The NZDUSD pair has indeed recorded a new higher high, but the bulls now face the challenge of defending these gains against a potential resurgence of bearish pressure. The market's direction in the short to medium term will likely be determined by the interplay of these bullish and bearish forces, alongside evolving global economic conditions and USD performance. Investors and traders should closely monitor key technical levels and indicators to gauge the pair's next significant move.
