NZD/USD tumbled during the Asian morning Thursday after New Zealand’s ANZ business survey showed that business confidence fell to a 10-year low. Specifically, the business confidence index fell to -50.3 from -44.9, marking its 6th consecutive slide. With the RBNZ holding the view that the direction of the next move in interest rates could be up or down, this data further increases concerns over a rate cut.
From a technical standpoint, the slide brought the rate below the support (now turned into resistance) barrier of 0.6685, to hit support slightly below 0.6650, before rebounding somewhat. Bearing in mind that the tumble came after the bulls struggled to overcome the 0.6720 key resistance, which acted as the lower boundary of the sideways range that contained the price action from the 3rd of July until the 8th of August, we would consider the near-term outlook to still be negative.
A clear break below 0.6650 could confirm the case for further declines and could pave the way towards our next support level of 0.6620, defined by the low of the 23rd of August. However, before the next negative leg, we believe that the latest minor recovery may continue for a while more, perhaps for the rate to test the 0.6685 level as a resistance this time.
Taking a look at our short-term oscillators, we see that the RSI fell below 50, while the MACD lies below its trigger line, near zero. What’s more, there is negative divergence between both these indicators and the price action. All these signs are in line with our view for further short-term declines, but the fact that the RSI has turned slightly up after its dip below 50 supports the case of some more recovery before the bears decide to take charge again.
That said, in order to start examining whether the bears have abandoned the action, we would like to see a clear and decisive break above 0.6720. Such a move would bring the rate back within the aforementioned range and could target the 0.6760 barrier, which acted as a strong resistance from the 3rd until the 8th of August. If the bulls manage to eventually overcome it, then we may see extensions towards 0.6785.
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