NZDUSD surged more than 1% on Wednesday to hit its highest level since October 20 at 0.7027. The strong up-move happened after a break out of a consolidation phase and has shifted the bias to the upside, though today’s down move is attempting to threaten the positive bias.
Short-term trend signals on the 4-hour chart (20 and 50-period moving averages) are bullishly aligned and NZDUSD is expected to find support on dips for now.
The market became overbought following the peak at 0.7027 as was indicated by the RSI crossing above 70 and there was a subsequent pullback for the pair towards 0.6985 today. This level is expected to act as a strong short-term support and corresponds to the 23.6% Fibonacci retracement of the rise from the December 11 low of 0.6827 to Wednesday’s 0.7027 peak.
A deeper retracement will risk eliminating the bullish bias but as long as NZDUSD remains above 0.6900 there is room for a push towards the key 0.7100 area. A clear break above Wednesday’s high would indicate the market has clearly moved into a bullish phase.
