NZDUSD: A Turnaround on the Horizon?
22 August 2023
When analyzing the NZDUSD currency pair, the recent movements have captivated many a trader's attention. The Kiwi (NZD) appears to be gathering significant strength, especially when juxtaposed with the recent weakness exhibited by the USD. The last 24 hours have especially been promising for the NZD, marking what can be best described as the onset of a robust correction phase.
Diving into the charts, it's evident that the NZDUSD pair was trapped in a pronounced downtrend since mid-July. However, the dynamics changed when the pair reached the 61.8% Fibonacci retracement level. Historically, this level has acted as a reliable marker, signaling potential reversals. And true to its reputation, the price action around this level didn't disappoint. A hammer candle formation emerged, which for those attuned to the language of technical analysis, typically serves as a buying signal. This candlestick pattern, highlighted in a shade of orange, could very well be the precursor to an impending upward trajectory.
Wednesday's trading session further bolstered the bullish sentiment. A strong surge in the NZD's value against the USD solidified the initial clues provided by the hammer candlestick. The next hurdle in this bullish rally lies at the black downtrend line. If recent momentum is anything to go by, this resistance might be tested sooner than anticipated. Overcoming this barrier would not just signify the continuation of the positive sentiment but would also shift the focus to the next target – the 50% Fibonacci level.
Breaking above the 50% Fibonacci would be akin to the NZD flexing its muscles, further embedding the bullish sentiment in the minds of traders. But it's essential to temper this optimism with caution. The foundation of this positive outlook rests on the 61.8% Fibonacci level. Should the NZDUSD pair dip below this crucial support, it might trigger selling pressures, hinting at a potential shorting opportunity.