NZDUSD ready to go up after failing to make new lows?NZD/USD has experienced a decline of 5.12% since 27 September, establishing a bearish trend line on the 4-hour chart. However, on 10 October, the pair began to break out of this bearish trend line, signalling a potential pause in the prevailing bearish momentum.
On 15 October, NZD/USD retraced, forming a double bottom pattern on the 4-hour chart. Notably, the price was unable to breach the previous support level of 0.6050, suggesting stabilisation in the market.
The Relative Strength Index (RSI) indicated a value of 21.06 on 24 September. By 15 October, the RSI had risen to 34.10, demonstrating higher lows in the RSI while the price made lower lows — a condition that characterises classical bullish divergence.
CPI Data and Its Impact
From a macroeconomic perspective, the release of the Consumer Price Index (CPI) data came in lower than expected (0.6% actual versus 0.7% forecast), which tends to be negative for the NZD and that is what caused the downward movement on October 15th. However, since the price failed to break below the previous low, this shows that the selling force is currently showing signs of exhaustion.
Key Elements to Consider:
1. Significant downward movement since 27 September, resulting in a depreciation of over 5% in NZD/USD.
2. RSI reading below 30 on 10 October, suggesting exhaustion of the selling momentum.
3. Breakout from the downtrend line on the 4-hour chart.
4. Formation of a double bottom pattern on the 4-hour chart.
5. Classical bullish divergence is observed on the 4-hour chart.
Potential for Ascendancy
Given the above elements, if NZD/USD manages to surpass the 0.6090 level, it is likely that the currency pair will ascend towards the 0.6160 region within the coming days, where it may face temporary resistance.
A Bullish Turn on the Horizon?
In conclusion, while recent indicators and patterns suggest a potential bullish reversal for NZD/USD, traders should remain cautious of external factors that may influence market dynamics. As always, close monitoring of price action and macroeconomic developments will be key in navigating this trading opportunity.
Disclaimer:
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