The New Zealand dollar has been under mild selling pressure on the foreign exchange market against the US dollar over last week, following a strong rejection from the 0.660 resistance zone.
Antipodean currencies have been under pressure due to mixed market sentiment and stock markets turning lower after posting strong gains into the monthly price for the month of May.
The NZDUSD pair is closely linked to China, and initial started to recover in June due to China starting to relax some it’s draconian COVID-19 measures in major Chinese cities.
Stronger-than-expected trade numbers from China also failed to bolster the kiwi. The nation’s Trade Balance came in at +78.76B versus +58B expected and +51.12B previous.
The details inside the report strong suggested upbeat figures for Imports and Exports for May, however, broad based worries surrounding inflation and growth exerts downside pressure on the Kiwi pair.
According to the ActivTrader market sentiment tool some 60 percent of traders are bullish towards the NZDUSD pair. As we typically look to fade sentiment biases, this could mean the NZDUSD pair could test much lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at current level, especially since the recent rejection from the 0.6800 to 0.6700 area.
NZDUSD Short – Term Technical Analysis
The four-hour time frame a show that a large, inverted head and shoulders price pattern has formed. Typically this is a good sign for bulls, as these are strong bearish reversal patterns.
If the pattern is correct then a decline back to the 0.6600 region seems plausible. If a recovery takes hold, then a rally towards the 0.7200 resistance level is more likely in the medium-term.
NZDUSD Medium – Term Technical Analysis
The daily time frame shows that the pair is falling towards the neckline of large falling price channel type pattern. These types of patterns are typically considered to be classic bullish reversal pattern.
According to technical analysis we could see more downside likely than while the NZDUSD pair trades under the 0.6500 level. Selling a retest of the 0.6500 level area appears the best strategy for the bears.