NZD/USD Price Analysis: Rotating in a range

The New Zealand Dollar trades flat against the US Dollar on Monday, after touching the top of a multi-week range, as traders bide their time ahead of the release of US Consumer Price Index (CPI) data on Tuesday. 

The release could impact expectations of when the Federal Reserve (Fed) is expected to cut interest rates. Since lower interest rates or the expectation of lower rates is negative, the data is likely to impact US Dollar pairs, including NZD/USD. 

NZD/USD rotates after touching range ceiling 

The NZD/USD pair rose up to a peak of 0.6218 on Friday hitting the top of a range that unfolded during February. The price then withdrew and fell back down as technical traders shorted the pair, forming a bearish Shooting Star Japanese candlestick pattern on the 4-hour chart (circled). 

New Zealand Dollar vs US Dollar: 4-hour chart

The combination of the Shooting Star with the range high – a formidable resistance ceiling – suggests a possibility the short-term trend could be changing, and the pair will start to descend back down towards the range lows at around 0.6090 – subject to fundamental developments. 

The Moving Average Convergence/ Divergence (MACD) indicator has just crossed below its signal line whilst in positive territory, giving a sell-signal and adding credence to the bearish outlook. 

The MACD is a particularly useful indicator for timing the turns in a sideways market such as this, as can be seen from the chart where the crosses in the MACD closely synchronize with the turning points in the price as it oscillates within the range.  

A breakout above the range high and the high of the Shooting Star would suggest the market was going higher, however, and possibly breaking out of the range, in which case it would expected to run higher to a target at 0.6309, the 61.8% Fibonacci extrapolation of the range higher.