NZDUSD fell aggressively on Wednesday towards a four-month low of 0.6523, but the price recovered most of its lost ground immediately and returned above a key support level of 0.6580. Since both the RSI and the Stochastics are close to oversold levels, the market could keep recouping losses. Yet what remains to be seen is if the bulls have enough fuel to exit the steep descending channel drawn from the March peak.
The red Tenkan-sen line at 0.66 may come first into view on the way up and before all attention turns to the upper boundary of the channel currently seen around 0.6623. Should the price break the channel to the upside, the rally may get further legs, with the spotlight turning next to the 20-day simple moving average (SMA) at 0.6673. A decisive close above the 200-day SMA, however, could be considered a bigger achievement.
Alternatively, the bears may retry to violate support around 0.6580 to drive the price back down to 0.6523. If the attempt proves successful, the next target will be the lower line of the channel around 0.6500, which if beaten too, would open the door for the 0.6423 trough, the lowest level reached since January 2016. Such a move would also turn the medium-term outlook even more bearish.
