The NZDUSD pushed to its highest level since June 5 yesterday, but the rally lost momentum and reversed lower, leading to a corrective move that has now reached an important technical support zone. The pair is currently testing its 200-hour moving average at 0.5819 while also holding near the 50% retracement of the May 29 high to the June 26 low at 0.5809. Today’s low reached 0.5812 before attracting some buying interest, suggesting this area is being closely defended.
From a technical perspective, buyers need to reclaim the 200-hour moving average and then push back above the 100-hour moving average at 0.5839. The 100-hour MA was broken during yesterday’s reversal after the rally to new highs stalled, coinciding with renewed U.S. dollar strength.
A move back above both moving averages would shift the near-term bias back in favor of the bulls and increase the odds of another run toward the June highs.
On the downside, a break below the 50% retracement at 0.5809, followed by a move beneath the 0.5800 psychological level, would strengthen the bearish case. That would likely trigger a rotation toward the next key support zone between 0.5765 and 0.5777.
Since late May, NZDUSD has experienced two well-defined trending phases—a sharp decline followed by an equally impressive recovery. Throughout both moves, the 100- and 200-hour moving averages have done a good job defining the prevailing trend. The recent break below the 200-hour moving average raises a caution flag for buyers, but as long as the pair can hold near the 50% retracement and reclaim the key moving averages, the broader recovery remains intact. The battle around this support zone is likely to determine the pair’s next directional move.
This article was written by Greg Michalowski at investinglive.com.