- NZDUSD in the red today after recording a new higher high
- Bulls took advantage of the widespread USD underperformance
- The stochastic oscillator could turn bearish soon
NZDUSD is edging lower, reacting to Tuesday’s 3-month high of 0.6085. It has been an aggressive rally from the November 1 low of 0.6017 as the NZDUSD bulls took advantage of the recent widespread USD weakness. They have managed to establish a bullish series of higher highs and higher lows but the next local trough has to be above the 0.5939 level for this pattern to remain intact. In the meantime, a stretched double top pattern appears to be forming with a move below the 0.5772 neckline needed for this structure to become active.
Amidst these developments, the focus has turned to the mixed momentum indicators. More specifically, the Average Directional Movement Index (ADX) points to a trendless market, and the RSI is edging lower but remains above its 50-midpoint. More importantly, the stochastic oscillator is trying to break below its moving average. If successful, it could signal the start of a correction in NZDUSD.
If the bulls remain confident, they could try to push NZDUSD above the 0.6060-0.6092 region. This is defined by the 38.2% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend, the July 14, 2022 low and the 200-day simple moving average (SMA). Even higher, the path looks clear until the October 1, 2019 low at 0.6198.
On the flip side, the bears are trying to regain market control. They could try to keep NZDUSD below the 0.6060-0.6092 region and then test the 100-day SMA at 0.5991. They could then set a course towards the 0.5920-0.5923 range that is populated by the May 15, 2022 low and the 50-day SMA. Even lower, the bears could face sizeable support at both the 0.5870 and 0.5813 levels.
To sum up, NZDUSD bulls have managed to record a new higher high, but they now have to defend their recent gains against the resurgent bears.
