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Technical Analysis – NZDUSD bulls face strong resistance

- Achilleas Georgolopoulos

  • NZDUSD is under pressure following a strong rally from the 2024 lows

  • It has met strong resistance at both the 200-day SMA and a key trendline

  • Momentum indicators are mixed; a bearish divergence is developing

After testing the 2024 low at 0.5851 and recording a sizeable rally, NZDUSD is now hovering a tad below the 0.6009-0.6033 area. It is trying to record its third consecutive green candle with the upside currently being limited by both the 200-day simple moving average (SMA) and the December 28, 2023 descending trendline. The bears are apparently protecting the developing series of lower highs and lower lows and are possibly preparing for another downleg.

In the meantime, the momentum indicators are mixed. More specifically, the Average Directional Movement Index (ADX) is tentatively hovering below its 25-threshold and thus signalling a trendless market. Similarly, the RSI has climbed above its 50-midpoint, but it appears unable to stage a strong move higher.

More importantly, the stochastic oscillator is edging towards its overbought territory (OB), maintaining a good gap from its moving average. However, a bearish divergence is developing as the lower highs in NZDUSD are countering the higher highs in the stochastics, and thus opening the door to a correction.

If the bulls remain confident, they could try to lead NZDUSD above the 0.6009-0.6033 area, which is populated by the 50- and 200-day SMAs. They could then have a go at testing the resistance set by the 0.6060-0.6092 range, which is defined by the 38.2% Fibonacci retracement, the July 14, 2022 low and the 100-day SMA, and return back inside the one-year-old rectangle.

On the flip side, the bears appear ready to retake the market reins and push NZDUSD below the December 28, 2023 trendline. They could then gradually stage a move towards the May 15, 2022 low at 0.5920 and, if successful, eye the recent 2024 lows.

To sum up, if the bulls want to break the recent series of lower highs and change the market momentum, they need to push NZDUSD back above the 0.6092 level.

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