- NZDUSD headed for eighth straight day of gains
- Bullish momentum continues to strengthen
- But is it at risk of a negative correction?
NZDUSD reached a fresh five-month high of 0.6293 on Wednesday, as its bullish streak shows no sign of easing. The momentum indicators are looking dangerously overbought but a reversal may not be imminent and the current upswing could continue for a little bit longer.
The stochastics have crossed into the overstretched zone but the %K and %D lines remain positively aligned, while the MACD has managed to rise back above its red signal line.
However, there is a more prominent warning sign from the upper Bollinger Band, which has been trying to put a lid on the rally for the past few sessions. If the price finally succumbs to this impediment, it could pull back towards the 0.6200 level, before retreating towards the middle Bollinger band, which is also the 20-day simple moving average (SMA) and near the 61.8% Fibonacci retracement of the July-October downtrend.
A dip below the 20-day SMA, currently at 0.6160, the decline could extend until the 0.6050 region, which encompasses the highs from September, October and November, as well as the lower Bollinger band.
But in the event that the bulls keep on powering ahead, there could be further trouble at the 0.6300 handle, which needs to be overcome if the rally is to advance towards the July top of 0.6410.
All in all, despite the rising risk of a downside correction, both the short- and medium-term picture for NZDUSD is resoundingly positive. Only a fall below the lower Bollinger band would undermine the bullish structure, while a climb above the July peak would place the uptrend on an even more sustainable footing.
