NZD/USD Price Analysis: Drops to three-week lows, remains vulnerable to slide further

The NZD/USD pair added to last week's heavy losses and witnessed some follow-through selling for the second consecutive session on Monday. The momentum dragged the pair to three-week lows, around the 0.7110 region during the early European session.

From a technical perspective, the NZD/USD pair confirmed a bearish breakdown through the head and shoulders neckline support on Friday. The subsequent fall has already set the stage for an extension of the ongoing corrective slide from multi-year tops.

The negative outlook is further reinforced by the fact that oscillators on the daily chart have just started drifting into the bearish territory. Hence, a subsequent fall below the 0.7100 mark, towards testing the 0.7040 support, looks a distinct possibility.

The downward trajectory could further get extended towards the key 0.7000 psychological mark, which represents the bearish pattern target. This, in turn, should act as a key pivotal point for traders and help determine the NZD/USD pair's near-term trajectory.

On the flip side, the pattern support breakpoint, around the 0.7145-50 region should keep a lid on any attempted recovery move. This is closely followed by the 0.7170-75 resistance, which if cleared decisively might trigger a short-covering move.

However, any subsequent move beyond the 0.7200 mark might still be seen as an opportunity for bearish traders and remain capped near the 0.7235 supply zone. Only a convincing breakthrough the mentioned barrier will negate the near-term bearish bias.

NZD/USD 4-hourly chart

Technical levels to watch