Flag Pattern Breakout Signals Buying Opportunity for NZDUSD Amid USD Decline
14 July 2023
In today's technical analysis, we're focusing on the New Zealand Dollar to the American Dollar (NZDUSD) pair, where a strong buy signal is emerging. This pair was largely influenced on Wednesday due to the Reserve Bank of New Zealand's decision to hold interest rates steady at 5.5% – a move that was widely anticipated, and hence, did not cause much surprise.
The NZDUSD pair has been on a notable upward trajectory, primarily due to the weakness of the American dollar, which is a global trend currently unfolding. Looking at the technical side of things, we observed a steady uptrend from the middle of October, which then shifted into a lengthy bearish correction from December onwards. This bearish correction formed a flag pattern on the chart, delineated by the red lines.
On Wednesday, the NZDUSD pair broke out of this flag pattern, climbing higher and thereby triggering a buy signal. This bullish sentiment was further confirmed in yesterday's trading session, as the pair created higher highs.
Today, we're seeing a small correction, but it's nothing serious, and the overall outlook remains bullish. The next target for this pair is at the yellow resistance line, and given the current momentum, the chances of reaching this level are substantial.
That being said, the buy signal will hold as long as the price remains above the green line. Although the likelihood of this scenario changing is relatively low at the moment, market trends can shift rapidly, and it's crucial to monitor any potential changes closely.