NZD/USD reversed south during the early European trading session today and seems able to continue trading in the same direction. For now, although the rate remains above the short-term downside resistance line taken from the high of the high 4th of December, given the sharp slide, we believe that NZD/USD might continue lower for a while more.
Because NZD/USD is trading below its key area of support, at 0.6770, there is a good chance the rate could continue drifting lower. We will now start looking into other possible support zones, which could slow down the depreciation. The first potential area of support may be seen near the 0.6732 level, marked by the intraday swing high of the 8th of January. Of course, at some point, we might see a correction back up, but if the bears remain strong, NZD/USD could once again shift back down. If this time the 0.6732 obstacle fails to withstand the bear-pressure, a further slide may lead to a test of the 0.6715 hurdle, marked by one of the strong support levels, seen on the 8th of January.
The RSI and the MACD are both now heading south. The RSI is below 50 while the MACD is below its trigger line, and is not far from the zero line. Both somewhat support the above discussed idea.
Alternatively, if NZD/USD suddenly makes a big retracement back up, which leads to the rate getting back above the 0.6800 level, this could force the bears to start worrying about the possibility of them staying behind the steering wheel. But for a better confirmation of the upside idea, the pair needs to get above the 0.6843 barrier, which could clear the path towards higher areas. This is when we will start looking into the likelihood of the rate accelerating towards the 0.6880 obstacle, a break of which may lift the pair to the 0.6912 resistance zone, marked by the high of the 11th of December.
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