NZD/USD entered a sliding mode yesterday after it hit resistance near the 0.6787 barrier, which is also near the highs of July 18th and 19th. The decline continued today as well, with the rate falling below the 0.6756 support (now turned into resistance), thereby completing a very short-term double top formation, and confirming the negative divergence between our oscillators and the price action. With that in mind, we believe that there is scope for some further declines in this exchange rate.
If the bears are willing to stay in charge, we would expect them soon to aim for the 0.6695 hurdle, a support defined by the lows of July 16th and 17th. The rate could rebound somewhat from that area, but as long as it stays below 0.6756, we would still see a decent chance for another leg south. The bears could target the 0.6695 barrier again, and if they manage to overcome it, we may see them pushing towards the 0.6660 zone, which is the low of July 12th.
Shifting attention to our short-term oscillators, we see that the RSI dipped below 50 and continues to point south, while the MACD, already below its trigger line, has fallen near zero. It could turn negative soon. These indicators detect downside momentum and corroborate our view for some further near-term declines.
On the upside, we would like to see a break above 0.6787, or even better above 0.6800, a resistance marked by the highs of April 2nd, 3rd and 4th, in order to start examining whether the bulls have gained back control. Such a move would confirm a forthcoming higher high and could see scope for extensions towards the peak of April 1st, at around 0.6837. Another break, above 0.6837, may extend the advance towards the 0.6864 zone, marked by the inside swing low of March 22nd.
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