NZD/USD Analysis: Kiwi may have bottomed out

The NZD/USD pair has likely bottomed out at a 33-month low of 0.6424 and could soon turn bullish above 0.67, technical charts indicate.  

As of writing, the NZD/USD pair is trading at 0.6560, having clocked a low of 0.6424 on Oct. 8. The recovery rally will likely translate into a bullish reversal above 0.67 (high of last month's doji candle). So, will Kiwi rise above that level? 

Technically speaking, the pair looks set to cross 0.67 as the indicators on the weekly chart have diverged in favor of the bulls.

Weekly chart

The relative strength index (RSI) has been charting higher lows since early August. Further, the MACD has been signaling a loss of bearish momentum since the end of June and has now produced a bullish crossover.

As a result, the spot could soon rise above 0.67, confirming a bullish doji reversal on the monthly chart, although subsequent gains could be capped around 0.68, as the 5-month and 10-month exponential moving averages (EMAs) are trending south, indicating a bearish setup. More importantly, the 10-month EMA is currently located at 0.6823 and is seen sloping downwards to 0.68 next month.

Notably, the bullish technical setup gains more credence if we take into account the macro picture. Indeed, the trade war fears linger, however, the Chinese yuan has stabilized and is likely to defend the crucial level of 7.00 per dollar in coming weeks, putting a floor under NZD and other commodity dollars.

Further, rising Treasury yields may no longer put a bid under the USD, as the market's attention in the near future is seen shifting to rising US fiscal deficit.