NZDUSD got trapped within the 0.6500-0.6600 zone after breaking below a supportive trendline and confirming a double top formation around 0.6796. It is worth noting that the 200 simple moving average (SMA) is also placed around these two peaks in the weekly chart.
Although the rebound in the Stochastics favours bullish actions in the short-term, the RSI, having posted a series of lower highs, is still below its 50 neutral mark. Adding to the bearish signals is the MACD which has been trending downwards since May and is currently moving within the negative area.
However, for the bears to retake control, the pair should close below the Ichimoku cloud and the August low of 0.6487, breaching the 23.6% Fibonacci level of the March rally at the same time. Then, the 200-day SMA could immediately come to the rescue around 0.6380, stopping the price from testing the 38.2% Fibonacci of 0.6278. If the latter fails to hold, sellers may gain additional momentum towards the 50% Fibonacci of 0.6120.
On the upside, a decisive step above 0.6600 is required to push the price towards the ascending trendline around 0.6720. If the bulls surpass the 0.6796 top, the way higher could be a rocky one as a cluster of obstacles within the 0.6850-0.6970 area could interrupt a climb.
Meanwhile in the medium-term picture, a drop below 0.6500 would confirm a neutral outlook, while a rebound above recent highs would bring the bulls back into play.
In brief, NZDUSD continues to face downside risks despite pausing its latest negative move. An extension below 0.6487 could generate additional losses, turning the medium-term picture to neutral.
