NZD/USD has dropped like a rock today and is pressuring a critical dynamic support level. The price has turned to the downside as the USDX continues to stay higher and because the pair has failed to take out the near-term resistance levels.
Monday's bearish engulfing pattern has signaled a direction change in the short term, but for now, NZD/USD is still trading within an upward channel. The USD has become stronger after the NFP, Unemployment Rate, and Average Hourly Earnings data were published on Friday. The Sell-Off was accelerated by the RBNZ in the morning.
NZD/USD has increased in the last weeks after the major drop, the growth was stopped by the 50% retracement level and now is almost to reach the 38.2% level again. The price is still traded above the uptrend line, channel's support, so only a valid breakdown will validate a reversal.
The pair has failed to reach and retest the channel's upside line signaling an overbought and exhaustion, MACD has shown a hidden divergence on the Daily chart and bearish divergence on the H4 chart.
I've drawn a descending pitchfork, hoping that I'll catch a bearish movement, NZD/USD has reached the median line (ml) in the first instance, it has increased again and it has registered only a false breakout above the upper median line (uml), this reaction could be considered to be a bearish signal.
- NZD/USD TRADING TIPS
A valid breakdown through the uptrend line, channel's support, will give us a chance to sell NZD/USD. The bias will be bearish as long as the price is trading within the descending pitchfork's body, below the upper median line (uml).
However, a larger drop could be confirmed after a drop below the 38.2% level, S1 (0.5920), and below the median line (ml). The monthly S1 (0.5920), S2 (0.5715), and the R3 (0.5588) could be used as downside targets if the price validates another leg lower.
Another buying opportunity could appear on NZD/USD if it registers only a false breakdown with a great separation below the uptrend line and if the price escapes from the black descending pitchfork's body, a breakout above the upper median line (uml).
