- NZD/USD attracted fresh selling on Tuesday and weakened back below the 0.6200 mark.
- The formation of a descending trend-channel point to a well-established bearish trend.
- Negative technical indicators on hourly/daily charts support prospects for further losses.
The NZD/USD pair witnessed some selling during the early European session and extended the overnight retracement slide from the 0.6250-0.6255 supply zone. Spot prices dropped back below the 0.6200 round-figure in the last hour and remain vulnerable to slide further.
Looking at a slightly broader picture, the NZD/USD pair has been trending lower along a descending channel extending from mid-June, which points to a well-established short-term bearish trend. The negative bias is reinforced by the fact that oscillators on the daily chart are holding deep in the bearish territory and have been struggling to gain any meaningful traction on hourly charts.
The technical set-up seems tilted firmly in favour of bearish traders and supports prospects for an extension of the recent depreciating move. Hence, a subsequent slide back towards the YTD low, around the 0.6150-0.6145 region touched last Friday, remains a distinct possibility. Bears might eventually aim to challenge the lower end of the descending channel, near the 0.6120 area.
A convincing break through the channel support, leading to some follow-through weakness below the 0.6100 round-figure mark would be seen as a fresh trigger for bearish traders. This, in turn, would set the stage for additional losses and make the NZD/USD pair vulnerable to prolonging the downward trajectory towards the 0.6000 psychological mark.
On the flip side, any meaningful move back above the 0.6100 mark might continue to confront stiff resistance and remain capped near the 0.6150-0.6155 region. The said area coincides with the top boundary of the descending channel, which if cleared decisively would negate the near-term bearish bias. This might prompt a short-covering move and push the NZD/USD pair to the 0.6200 mark.
NZD/USD 4-hour chart
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Key levels to watch
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