FX.co ★ NZD/USD

The NZD/USD currency pair started the week under the threat of another bout of selling and fell to its lowest level since July 29 as the European session got underway. In the early stages of the session, the NZD/USD pair traded near 0.5780, suggesting another move lower was imminent. Looking at the bigger picture, this view is supported by fundamental factors which indicate that the trend of least resistance for spot prices is to the downside. More specifically, last week’s US inflation data increased the likelihood that the Fed will hike interest rates after its two-day meeting scheduled for later this week. This increases selling pressure on the dollar and supports a bearish bias on the NZD/USD pair. Meanwhile, other events have also contributed to the development of risk-off sentiment – the escalation of tensions between the US and Iran added to the dollar’s status as a safe-haven asset. Meanwhile, dovish rhetoric from the Reserve Bank of New Zealand (RBNZ) has further bolstered the bearish tone for the NZD/USD pair.

Last week, the price fell below the confluence of 0.5855 to 0.5850, an area that is composed of the 200-day Exponential Moving Average (EMA) and the 50% Fibonacci retracement of the move from June to August. This breach is a critical factor for the bears, marking their renewed dominance in market action. The technical setup also showed a bearish Moving Average Convergence Divergence (MACD), while the RSI continued to trade above the oversold level of 35. On the other hand, short-term support coincides with the 61.8% Fibonacci retracement level at 0.5764. The next Fibonacci retracement level to watch is the 78.6% retracement at 0.5704, from which buyers could take some time to evaluate the market situation. Any further upside will require a solid rebound from the support area to test the overhead resistance at 0.5807 and an alternative cap level at the confluence of 0.5849. While the currency pair continues to trade below this resistance area, the upward trend will be seen as corrective in nature.