NZDUSD is making a corrective move lower after a recent uptrend stalled at a high of 0.7557 on July 27. The market became overextended at this more than 2-year high as indicated by RSI rising above the 70 level.
Following a short consolidation phase just above support at 0.7462, prices fell below this level which has turned into resistance. It is also where the 50-period moving average (MA) is currently located.
Further downside is expected since RSI has fallen below 50 into bearish territory. Support at 0.7378 is the next target. This is identified as the 50% Fibonacci retracement level of the upleg from the July 11 low of 0.7201 to the July 27 high of 0.7557. This is a critical level, which if broken, could accelerate a move lower and open the way to the 61.8% Fibonacci at 0.7335. Such a move would increase downside pressure for a move towards 0.7272 and then the key psychological 0.7200 level.
The technical picture is turning increasingly bearish as the shorter-term 20-period MA is pointing down and is about to cross below the 50-period one. This bearish signal combined with the falling RSI is strengthening the short-term bearish bias.
Only a move above 0.7462 would bring NZDUSD back to neutral. A break above the 0.7557 peak would see a resumption of the recent uptrend.
The near-term bias remains bearish under the 50 SMA while in the bigger picture, the bullish market structure is still intact.
