NZDUSD plunged by 1.5% and straight to a two-week low of 0.6792 early on Wednesday after an attempt to reach resistance around its previous peak of 0.6940. The October uptrend line drawn from the 32-month low of 0.6423 seems to be acting as support once again, though, the risk remains on the downside as the MACD is ready to drop under its red signal line. The RSI is also in bearish territory below 50 and is clearly pointing down but it is also approaching a familiar support area around 40.50 – the indicator reversed at this point twice this year – where another rebound may reduce chances for more price declines.
If the market corrects higher, the bullish action may pause initially near 0.6870 before attention shifts to 0.6940 which overlaps with the 50% Fibonacci of the long downleg from 0.7436 to 0.6423. A rally on top of the latter and more importantly above the December high of 0.6968 would probably stage fresh buying pressure, with the price moving next to the 0.7050-0.7100 restrictive area.
On the other hand, violating the uptrend line, could see losses extending towards the 200-day moving average (MA) currently at 0.6732, which is flattening. Even lower, the bears could stall around 0.6650 where the December sell-off stopped.
In the medium-term picture, NZDUSD would resume upside trend above 0.6968, while a dive below 0.6650 would bring the bearish outlook back into play. It is also worth noting that the 50-day MA keeps distancing itself above the 200-day MA, raising optimism for a bull market.
