NZD/USD bears activate at wedge resistance, flurry of bearish patterns occur to hamper consolidation phase in major trend – tunnel spreads to trade
Before emphasizing on the core areas of NZDUSD technicals, we want you to know that the pair for the day has stalled last week’s rallies and stuck between 0.6850 and 0.6900 (i.e. between 21DMA & 7DMA).
From last Friday, the bulls seem to have given up the momentum in the previous uptrend.
The prices are moving in the falling wedge pattern, it has shown the failure swings at the same wedge resistance level, where both leading oscillators have indicated the losing strength and momentum in the previous rallies. Momentum now seems to be turning into bearish interests.
The attempts of spikes are restrained below 21DMAs, the current price is still well below these levels but supported at 7DMAs (refer daily chart).
Well, on a broader perspective, the pair forms bearish engulfing and shooting star pattern candles after the rejection at the stiff resistance of 0.7499, the major trend resumes bearish swings to slide below EMAs after the failure swings at these supply areas (on monthly plotting).
Shooting star at 0.6902 & 0.7199 and bearish engulfing patterns at 0.6897, 0.7176 and 0.6846 levels have occurred on daily and monthly terms respectively.
We’ve already stated in our previous post also that this pair pops up with the bearish pattern candles that have now hampered the momentum in the consolidation phase to retrace upto 50% Fibonacci levels.
For now, we foresee more dips after sliding below 50% as 7EMA crosses below 21EMA which is a bearish crossover.
It is traced heaps of bearish indications on both daily as well as monthly terms, consequently, we’ve been seeing steep slumps from the last three-four months.
Thereby, the consolidation phase in the major trend seems to have been exhausted at the stiff resistance of 0.7499 levels and more slumps are likely below 50% Fibonacci retracements (refer monthly chart).
Most importantly, both leading oscillators (RSI and Stochastic curves on monthly terms) have been constantly converging to the ongoing price dips that signal the strength and intensified momentum in the bearish trend.
Notably, the current price is now below psychological levels of 0.70.
Well, contemplating above technical rationale in both short and intermediate terms, we advocate tunnel spreads snapping rallies to target upto 0.68 levels (i.e. about another 60 pips southwards from the spot reference of 0.6860). Use upper strikes at 0.6884 and lower strikes at 0.68, these leveraged instruments are likely to fetch magnified effects in payoff structure as long as underlying spot FX keeps dipping.
Alternatively, on hedging grounds, we recommend shorting near-month month futures as the underlying spot FX likely to target southwards 0.67 levels in the medium run.
Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.
Currency Strength Index: FxWirePro’s hourly NZD spot index is inching towards -50 levels (which is bearish) ahead of RBNZ’s governor’s speech, we expect the RBNZ to still be somewhat cautious tomorrow morning, perhaps disappointing market looking for a slightly more hawkish tone. While hourly USD spot index was at shy above -121 (extremely bearish) while articulating (at 06:43 GMT). For more details on the index, please refer below weblink:
Source: FXWire Technicals