In today’s technical analysis, let’s take a closer look at the New Zealand dollar to American dollar (NZD/USD), which remains in a clear downtrend that started in mid-September. The structure of the chart is very typical for a trending market: strong bearish waves followed by short-lived bullish corrections. The most recent correction is taking the shape of a wedge pattern, marked with blue lines. This formation suggests that volatility is decreasing, and traders are awaiting a decisive breakout that will set the next directional move.
Adding to the technical tension is the fact that the wedge pattern is forming right on top of a key horizontal resistance, highlighted in red. This level has proven its importance in recent weeks, as every time the price approached it, sellers managed to defend it successfully. The current test of this resistance is no different — buyers are attempting to push through, but the market is showing hesitation. This setup creates a textbook technical scenario where the next breakout will likely determine the medium-term direction for NZD/USD.
From a trading perspective, the situation is straightforward. If the price respects the red resistance and then breaks below the lower blue line of the wedge, that would be an invitation to go short, aligning with the broader bearish trend and potentially signaling a continuation of the sell-off. On the other hand, a decisive breakout above the upper blue line of the wedge would cancel the bearish outlook and trigger a buy signal, indicating that the correction might evolve into a larger reversal. For now, NZD/USD remains at a make-or-break point, and traders should prepare for volatility once the breakout occurs.