NZD/USD Price Analysis: Spinning Top favors a bearish reversal

The NZD/USD pair is displaying a sideways auction profile in the early Asian session after a sell-off from above the psychological resistance of 0.6500 on Wednesday. The Kiwi asset is expected to witness pressure ahead as the risk appetite of the market participants has dropped vigorously after hawkish commentaries from Federal Reserve (Fed) policymakers.

S&P500 witnessed a massive sell-off amidst earnings season as lower bargaining power in the favor of producers will trim operating margins. Also, lower inflation projections due to the soft Producers Price Index (PPI) report were responsible for a plunge in the 10-year US Treasury yields to 3.37%. The US Dollar Index (DXY) is juggling around 102.00 after a V-shape recovery from a fresh seven-month low at 101.20.

NZD/USD is demonstrating signs of a bearish reversal led by the formation of a Spinning Top candlestick pattern. The aforementioned candlestick indicates indecisiveness in the sentiment of investors for further action, which also marks a reversal in the ongoing trend.

Other filters such as Exponential Moving Averages and momentum oscillators have not displayed signs of reversal yet, due to their lagging characteristic.

The 20-period EMA at 0.6366 is still upward-sloping, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00 but still needs to sustain above for bullish momentum.

For a downside move, a breakdown below January 16 high at 0.6426 will drag the Kiwi asset toward January 17 low at 0.6366 followed by January 12 low around 0.6300.

On the contrary, a decisive break above Wednesday’s high at 0.6530 will drive the asset toward June 3 high at 0.6576. A breach of the latter will expose the asset to the round-level resistance at 0.6600.

NZD/USD daily chart