NZD/USD plunged aggressively today and resumed the yesterday’s bearish candle. Technically should drop much deeper on the short term, but was stopped by a strong confluence area. Price dropped significantly even if the USDX failed to stay higher and now is trading in the red. USDX failed once again to stay above the 93.50 psychological level and now is going down again.
The dollar index is moving sideways, but remains to see if this is an accumulation or a distribution movement. A further USDX’s drop will send the greenback much lower versus its rivals. USD could receive support from the US New Home Sales, which is expected to increase from 610K to 611K. The Flash Services PMI and the Flash Manufacturing PMI could increase will be released as well.
Price dropped through the confluence area formed at the intersection between the red downtrend line with the minor red uptrend line. A valid breakdown below this confluence area will accelerate the sell-off and will validate the Head and Shoulders pattern.
Technically was expected to drop further after the retest of the fourth warning line (wl4) of the former ascending pitchfork. NZD/USD should drop more than 300 pips if the Head and Shoulders pattern will be confirmed. However, a false breakdown below the mentioned confluence area will send the rate towards the third warning line (WL3) of the former descending pitchfork.
