NZDUSD switched to a recovery operation on Wednesday after halting its downleg near a three-week low of 0.6714 and around the bottom of the Ichimoku cloud.
Despite its latest deceleration, the pair maintains a neutral structure in the medium-term picture. Yet, the negative reversal in the 20-day simple moving average (SMA), which immediately pulled below the 200-day SMA, is feeding some trend skepticism.
Meanwhile in the short-term picture, the current bullish action is also not convincing yet. Even though the Stochastics seem to be creating a double bottom below their 20 oversold level, the lines have yet to confirm the bullish pattern. Moreover, the RSI has pivoted, though it is still well dipped in the bearish area, while the MACD has displayed no signs of progress.
Given the above questioning technical signals, the focus will be on the nearby 38.2% Fibonacci retracement of the 0.7217 – 0.6528 downleg at 0.6790 and the 50-day SMA at 0.6817. Should the price cross that constraining zone, buying pressures are expected to intensify towards the 50% Fibonacci of 0.6872 and the 200-day SMA. Perhaps the broken supportive trendline coming from the low of 0.6528 may cement that wall as well. Further up, the rally could stage another acceleration towards the 61.8% Fibonacci of 0.6998.
In the bearish scenario, where the price entirely ruins its 2022 uptrend below the cloud at 0.6724, and more importantly, beneath the 23.6% Fibonacci of 0.6690, sellers could aggressively drive towards the 0.6600 mark. If the latter fails to add footing, all attention will turn to the 0.6528 bottom.
Summarizing, while NZDUSD is trying to minimize its weekly losses, short-term technical signals suggest a bullish attitude has not successfully developed yet. A step above 0.6790 could give the green light for more progress, whereas a plunge below 0.6724 would cause an outlook deterioration.
