The US dollar is having its way with its counterparts this week. One such pairing is the NZDUSD. Despite a gap up to start the week, the risk-sensitive pair is now 130 pips off of its weekly highs and isn’t showing signs of stopping just yet.
I mentioned the 0.7200 area last week, which broke down on Wednesday and was subsequently retested as new resistance ahead of the weekend.
However, there are two reasons why I’m not ready to get overly bearish just yet. One is fundamental and the other technical.
Let’s start with the upcoming fundamental driver. Of course, I’m referring to today’s FOMC meeting minutes which are due out shortly at 2 pm EST. With the US dollar in rally mode of late, these meeting minutes will either support the ascent or act as a roadblock to further gains.
The second obstacle here is ascending channel support that extends from the current 2016 low at 0.6346. I called attention to the pattern last week, but it’s worth pointing out again.
From here things are pretty straightforward. A daily close below channel support near 0.7020 is needed to confirm a more bearish scenario for the NZDUSD.
With that said, the absence of a lower low means that we’re technically still dealing with an uptrend. The swing low I’m referring to is the July low near 0.6965. Note that this area also supported prices on June 15th and 16th as well as the post-Brexit low on June 24th.
A close below this area would expose the pivot from earlier in the year at 0.6840. All in all, my outlook remains tilted to the downside, but further confirmation is needed before I’m ready to put capital on the line.
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