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The New Zealand dollar is under pressure against the US dollar on the foreign exchange market as traders pay more attention to the Federal Reserve policy meeting outcome than the recent strong GDP data from the New Zealand economy.
A breakdown in the NZDUSD pair is currently underway from a massive broadening wedge pattern, despite recent GDP data which showed that the New Zealand economy grew much faster in the first quarter than economists had been expecting.
Inside the data a clear case was made for an improving domestic outlook, as a rebound in construction activity and robust domestic spending helped to offset dwindling tourism revenues.
New Zealand Gross Domestic Product rose 1.6 percent during the first three months of 2021, which far exceeded most experts forecasts of 0.5 percent. Traders and investors have swept aside the notion that the RBNZ may tighter sooner than previously expected.
Digging into the technicals, the NZDUSD pair is heavily bearish in the short-term while trading below the 0.7090 level, while the overall bullish trend in the pair now eroded and only intact while the price trades above the 0.7035 level.
On the sentiment front traders have a slight bullish towards the New Zealand dollar right now. According to the ActivTrader market sentiment tool some 57 percent of traders are bullish towards the NZDUSD pair. Considering that the pair is now bearish in the short-term I tend to think more losses are likely coming.
NZDUSD Short-Term Technical Analysis
The four-hour time frame shows that a bearish breakout has taken place from a large megaphone price pattern. The NZDUSD pair is in serious danger after breaking under the mentioned pattern.
According to the overall size of the typically price pattern a decline of around 250 points could be about to happen, placing the 0.6850 level in focus as a potential bearish target. Watch out for further losses in the NZDUSD pair while the price continues to hold under the 0.7090 level.
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NZDUSD Medium-Term Technical Analysis
Looking at the daily time chart it appears that an extremely large bearish head and shoulders pattern has formed, which is warning of a potential 300-point drop in the NZDUSD pair.
Sellers need to hold the price below the 0.7050 level, or the neckline of the pattern, to activate the bearish price pattern. Bulls need to move the price above the 0.7460 level to invalidate the pattern.
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