NZDUSD paused its decline from the July 27 high of 0.7557 to the August 16 low of 0.7222. After staging a robust rebound from this one-month low yesterday, the pair lost upside momentum. Prices reached the strong resistance level at the 61.8% Fibonacci retracement level (0.7335) of this downtrend.
RSI remains above 50 in bullish territory which leaves room for further upside in the near-term, with scope to target the 50% Fibonacci at 0.7378. A break of this resistance would help ease pressure and turn focus back to the upside to further Fibonacci levels at 0.7420 and 0.7472 ahead of the 0.7557 peak. From this point, there would be a resumption of the longer-term uptrend that started in May.
As long as 0.7335 resistance holds, the risk is to the downside. Failure to rise above this level could bring a deeper decline towards the key 0.7300 level ahead of the August 16 low of 0.7222. From here, the July 11 low of 0.7200 comes into view. A break below this would accelerate a decline towards 0.7000. Until this point, the market structure will remain neutral on the 4-hour chart, with NZDUSD hemmed in between 0.7200 and 0.7550. The overall outlook is neutral to bearish, with the 20 and 50-period moving averages giving a bearish signal.
